Did you know that some of the richest people around you might actually be the highest debtors? Take someone who has committed nearly half of their salary to service a development loan with a housing finance corporation. By the time the repayment is over, this person has a title to property that has appreciated over the years, and they can sell it for way more than they bought it. Here is what you need to manage loans well and get the most of them:
Saving Versus Borrowing
The first step to managing a loan well is asking yourself if you require the loan to cover a need or want. Loans are a big commitment that determine the next stage of your financial well being. You could be better off or worse. Ideally, you should borrow a loan to cover a need not want. Viable business opportunities and investments are worth taking loans for, especially if your market surveys promise good returns on investment. For wants, saving up for them is a more responsible decision, as you conveniently avoid the interest you would be charged on a loan facility. You can use a fixed deposit account to optimise your savings by taking advantage of the marginal interests that the bank accrues on your deposits.
Consolidate Your Loans
Loan consolidation is another way of managing your loans well. A common mistake people make is to go for different loan facilities offered by various creditors without a clear understanding of the financial implications. Running multiple loans at the same time can easily make you drown in debt. In such a case, you should look for a loan consolidation product that allows you to merge all your small loans into one. You will take advantage of lower interests and a more flexible repayment period.
Avoid Non-traditional Lenders
When you are in a financial crisis, it easy for an agency or an individual to dupe you into borrowing money from them. This may be an easy way out, but you have so much to lose because non-traditional lenders have irrational interest rates and repayment periods. Worse still, most of them are not covered by regulations governing banks and other lending corporations. Using non-traditional lenders can easily make you lose your car, business or home as you struggle with their high interests rates.
For more information, get in touch with a financial advisor in your area.