Unsettled loans can prove to be a burden to our financial health. In addition to the loans themselves, other financial obligations in Singapore could make it hard for us to settle the loans as fast as we wish. This prolonged repayment method will rack up interest rates, and when things pile up, it’s easy to get swallowed up by your debts.
Trying to manage finances during such a time will be tricky, but with proper financial handling and strategy, it is possible. Not only will you be able to get yourself out of debt, but you will have enough money left over for other areas in your life.
Read on to learn more about how to better manage your finances to settle outstanding debts.
1. Keep track of your monthly expenses
It is good practice for you to keep track of all the financial obligations that you have to attend to every month, such as your mortgage and utility bills, food and groceries expenses, and outstanding loans. By doing so, you’ll gain a clearer picture of where and how you divert your earnings. This will help you visualise how much you have left once you have taken care of your financial obligations. In essence, noting down your expenses and budgeting will grow your finances and avoid accumulating debts.
2. Assess and evaluate these expenses
Once you have punched in the numbers, it is time to figure out if you will be able to settle your monthly due with your leftover earnings. Suppose you can pay them back; in this case, you probably won’t have much left to contribute to your savings. As such, go back to the list you’ve made of your monthly expenses and identify the expenses that you can either minimise or omit.
If you are not able to pay your monthly dues, you may need to re-evaluate your expenses with a budget and make the difficult decision of prioritising certain expenses over others. This will help you to avoid the accumulation of interest that can easily rack up with prolonged repayment.
3. Pay more to save more
With most loan agencies, discounts on interest rates are offered if you pay more than what is due. The more you pay off what you owe every month, the less your interest and the outstanding balance will be. This will naturally translate to bigger savings.
These are some examples to do this:
Option 1. Make bi-weekly payments
Instead of waiting for the end of the month to pay a portion of your loan, try submitting half-payments every fortnight instead. This will allow you to apply for your payments more often, which means you’ll accrue less interest and significantly shorten your loan tenure.
Option 2. Make one extra payment each year
If the idea of bi-weekly payments appears a tad bit too daunting, you can try the alternative instead: commit to an extra payment each year. Similar to bi-weekly payments, you are able to shorten the life of your loan by simply making an additional payment. Use your bonus, tax refund, and the like to make that once-a-year payment to lessen the blow to your finances.
However, before applying these strategies, do take note that some credit facilities, such as credit cards, may incur fees if you decide to make an early repayment. This is why it’s crucial to always check with your lender or credit provider first before deciding to pay off your debts earlier than expected.
4. Combine multiple loans into one repayment term
When you’re trying to settle multiple loans at once, dealing with different payment due dates can be an overwhelming task. But this does not always have to be the case. There is a way to combine multiple debts into one, making the repayment process a smoother and more straightforward one, via a debt consolidation loan.
A debt consolidation loan from a licensed moneylender can be a helpful solution for individuals struggling with multiple debts. With a debt consolidation loan, you can combine all of your debts into one manageable monthly payment. This can simplify your financial situation and potentially lower your overall interest rate.
Before you sign up for one, do your research and work with a reputable licensed moneylender to ensure that you’re getting a fair loan with reasonable terms and interest rates.
5. Refinance
One of the most effective ways to pay off your debts is to simply work on refinancing, especially if your credit score has significantly improved or the interest rates have dropped due to a policy change and the like. With these favourable conditions, paying off your loan will be so much easier. If you opt for this approach and employ the other tips, you’ll be able to shorten the life of your loan much more.
Conclusion
Credit and loans are quick solutions to getting out of a financial pickle. But if you’re not wise in handling your finances, they can easily become a problem. To avoid this, make it a habit to manage your income and expenses accordingly so that you can quickly settle your outstanding loans and save up at the same time.
Consolidating your debts into one manageable payment can be a game changer. Contact Goldstar Credit, a licensed moneylender with offices in Hougang and Toa Payoh, to learn about our debt consolidation loans and how we can help you regain control of your finances.
