Can a new personal loan save you?
Digging yourself out of debt can seem like a daunting task, but luckily, you have a lot of options at your disposal when you try to work your way out of past mistakes. Keep in mind, however, that working yourself out of debt requires some smart decision making. If you misuse the tools at your disposal, you can undo your efforts to improve your situation and make things worse.
So how do you make personal loans work for you instead of against you when you’re trying to pay your old loan? Simple: take advantage of good situations when they arise and take the time to make the right calculations. Here are a few tips to help you do exactly that!
Know Your Interest Rates
Failing to know an interest rate is a common mistake people make when trying to get themselves out of debt. But when you’re dealing with similar sums of money, the interest rate is vital to deciding which loans you should pay off first. If you ignore a larger interest rate, you’ll end up paying more in the long run.
For example, if you have a personal loan of $10,000 at 10 percent interest and another $9,000 loan at 16 percent, you need to payoff the $9,000 loan first and minimize your interest on debt. As a rule, always payoff high interest loans first.
Borrow a Little More
When you take out a new personal loan to repay an old loan, it makes sense to borrow a little extra to make sure you can cover unexpected fees that may be associated with the old loan. Some loans have prepayment penalties and other fees attached to them for early payoff. If you don’t borrow enough to cover them, you’ll find yourself a few dollars short of paying off your old loan. Having to make multiple small payments isn’t an ideal situation, and it’s best practice to avoid it if possible. To see if you can start saving money every month, request a loan today.
Borrow What You Can Repay
Being honest with your finances can help you avoid compounding past mistakes. Make sure that you borrow only what you’re sure you can repay over the course of the loan. You don’t want to keep digging a bigger hole by borrowing more money.
Achieving financial success isn’t something that happens overnight. Using personal loans responsibly can speed up the process. By knowing the facts and being honest with yourself, you can make a loan work for you and help you get out of debt, permanently!