If you have a couple of Personal Loans just sitting under your belt, you might be running into a situation of severe cash shortage at some point. It would be a tough situation to deal with and can turn so much intense that you might have sleepless nights and nightmares. Every moment, you will feel the urge to derive at an idea that could resolve the problem, but given the level of stress and tension, it is hard to find one.
The Personal Loan becomes a requirement in times of financial distress. It is an easy and reliable option of getting finance to solve the problems that revolve around money. It is convenient to choose Personal Loan as an option because the loan amount can be repaid in installments and the repayment structure is very flexible. One can find a Personal Loan at Affordable Interest Rate and that too, without any security or collateral. It can become a burden over the time if you have a multiple of them or in the cases when you are nowhere in a condition to repay owing to the increase in monthly expenditures, low salary hike or it can be any other reason.
In these times, you need to consider every input and think about implementing the ideas that can resolve your issue. One has to realize however that they can never come out of this strain in an instant just like casting a magic spell. It takes a considerable amount of time, and you need to be rational in your approach.
There can be many choices and plans to get rid of Personal Loan burden. Finance experts usually suggest two important methods that have been proven to be effective over the years when tackling Personal Loan. They are the stack method and the debt snowball method.
The stack method takes a route that consists of the following steps:
- You, as a borrower would be listing down all the credit taken by you.
- You are then supposed to arrange the list in descending order, basis the interest rate. This means the loan with the highest interest rate sits just atop of the list while the one with the lowest interest rate rests at the bottom.
- The highest interest rate loan would be the priority and clearing this at the earliest is the primary step.
This technique is so simple to devise and implement yet it is very powerful. When you give priority to the loan that has a very high interest rate in the list and quickly pay it off, then you are not going to pay extra money for the remaining time and this way your time is saved and you are no more stressed with the additional interest amount.
Debt Snowball method
The approach manner in this method is much similar to the behavior of a snowball as suggested by the method’s name. A snowball starts as a tiny spherical object which gathers mass as it rolls down a mountain covered by snow. After it reaches a flat surface, the ball is no more a small object, but it becomes a very big ball compared to its initial shape. The same applies to the Debt Snowball method’s approach.
- List down the loans and their interest rate.
- Sort it in an ascending order based on the interest rate. This means now; the first entry will be the one with the lowest interest rate.
- Start closing down the loans as per the list in the sorted order by paying off the first, then followed by the next one.
This method boosts your confidence since, as you clear off each loan in the list, you get a feeling of satisfaction. Since, at the start, you are going to pay loans with the lesser interest rate, there would always be the certain amount left in your hand, and you could plan about it later like paying off the next higher interest rate loan with the saved money.
Additional tips to free you of the loan burden
After reading through both the methods, depending on your requirements and situation, you can choose either of the methods to repay your loans. This kind of planning pulls you out of confusion and chaos. The stack method is more comfortable repayment method of the both as you could save money at the end. There are few other tips that can help to alleviate the Personal Loan burden off your shoulders.
- Cut down the expenses by reducing the unnecessary luxury requirements. Your decision must focus on the basic needs until you arrive into a situation where you can ultimately breathe heavily with a relieved feeling.
- If you have extra money, avoid it on entertainment and shopping and rather give importance in paying off the extra EMI.
- Keep a regular tracking on the loan details. It will help you to decide about the subsequent steps necessary to be taken.
- Sell the immovable or movable properties whose maintenance cost is more than what you initially thought. It can be a house which requires frequent repairs, or it can be an old car that has a great thirst for fuel.
- You could find any other lender to avail a Personal Loan such as Tata Capital Personal Loan or Axis Bank Personal Loan, where the interest rate is considerably less and affordable. Transfer your loan from the existing lender. This way, you will never feel tired of paying a high amount of EMIs. It, in turn, enhances your confidence level.
- Try to pay the loans with high-interest rate first.
The tips mentioned above can be applied into your situation as individual points or can be implemented along with the stack method or the debt snowball method. One last point that you need to pay attention to the timely payment of EMIs keeps you out of all the trouble, and it is your sole responsibility to keep yourself ready to pay the EMI. Planning and timing are very necessary for repayment of Personal Loan on time and doing so, will never let you get strangulated in any scenario.