Personal loans are inherently lucrative propositions. They are easy-to-access solutions for immediate cash flow needs. However, it is important to keep in mind that a personal loan, at the end of the day, is a liability that needs to be paid off. Due to the risk associated with providing collateral-free loans, lenders might even charge higher rates to cover for it. Defaulting on your personal loan can also reflect poorly on your CIBIL credit score and reduce your chances of getting a reasonable rate the next time around.
To add to this, if you have more than one ongoing loan, the financial burden can significantly increase. However, no matter how frustrating it can be to plan for Equated Monthly Installments (EMIs), you need to come out of debt with the right steps. Start by ensuring financial discipline and following the two recommended methods of debt repayment below-
Debt Snowball Method:
Think about it as a snowball rolling down from the top of a mountain. At the start of its descent, the snowball was relatively small. However, as it starts to reach the bottom of the mountain, it keeps on adding layers of snow to its body and ends up as a boulder. The Debt Snowball method is similar to this example in many ways.
First, under this method, the borrower starts paying off small outstanding amounts regardless of the interest rate.
In due time, he or she builds momentum and starts to pay off more debt. Therefore, with this method, you should arrange all your obligations in ascending order so that the lowest comes first.
The idea is that when you pay off one loan amount at a time, there will be a part of the savings left behind to pay off the next one (with costlier EMIs).
In this way, you can ensure a consistent effort towards paying off your debt.
The Stack Method:
Next, we have the stack method. It is different from the previous method, in this one, you start with the costliest loans first. Under this method, the borrower makes a list of his or her debt obligations but writes them down in descending order according to the interest rate. The obligation with the highest interest rate will be at the top of the list followed by the others.
This method ensures the priority is given to the highest financial obligation. Now, the borrower starts to pay off the costliest loans and save for the impending interest outgo. With this method, you can save money to pay off the remaining loans with ease.
Some more advice on Personal Loan
The above-mentioned methods can help you reduce your personal loan burden with ease. However, you should remember that debt repayment requires a considerable amount of determination, discipline, and self-control. If you have taken up several debts, you should ensure that you do not add any more to your financial portfolio. Staying away from new obligations is the most important step in the process. In addition, you should also cut down on unjustified expenses and budget your expenses as per your current income.
Try not to overspend and stick to your budget at all times. The last step is ensuring that you save at all points in time. The more the savings, the more the amount available to pay off your debt obligations. Cut down your expenditure and have a stringent budget in place to keep adding to your savings. With these factors in mind, you will have a considerable amount of savings available to pay off your debt with ease.
The best place to find personal loans
Digital lending platforms today offer quick and convenient financial solutions in a matter of minutes. You should log on to an online portal such as Finserv MARKETS to know more about some of the leading personal loans in the market including the Bajaj Finserv personal loan product which has competitive interest rates and ensures affordable access to all your needs.
Cutting down your financial burden is a critical step in ensuring a worry-free lifestyle that gives you the time to focus on your life goals. So whether you are looking for a personal loan to cover costs related to travel, education, weddings, or other needs, a Bajaj Finserv personal loan on Finserv MARKETS can help you live your life’s most important moments to the fullest.
Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!