Menu

How to Pay Off All Your Loans Before Retirement

May 20, 2018 |

Australians are now in more debt than ever. Unlike the rest of the developed world, where loans are being paid down, the indebtedness of the average Australian household has tripled. Starting roughly from the age of 20, an Australian takes out a staggering number of personal loans, in addition to student loans and mortgage loans. Paying it all back is not easy. While there may be numerous debt help professionals open for business, there are several strategies to manage outstanding loan payments without accumulating unwanted expenses.

 

Repack everything into one

The easiest way to manage multiple monthly loan payments is by debt consolidation. Basically, it’s a package offered by banks and financial institutions that lets consumers combine several loans into one. While packages differ from bank to bank, most offer options for combining multiple student loans, unsecured loans and credit loans. Not only does this make repayment easier and more convenient, customers can even qualify to pay a lower interest rate than before. Despite the tempting perks, combining loan payments is not for everyone. Do not merge without a steady source of income to cover essential expenses. Due to the fact that services offered range in quality, there will always be a certain level of risk associated.

Strategise

Repaying loans one by one starts with carefully planning a monthly budget. It’s a simple strategy to make sure all expenses are accounted for, and can be paid for, in a timely manner. Keep in mind not to leave out any expense no matter how small. Don’t forget to allocate a sum each month for “entertainment,” such as eating out. Once the budget plan is drawn, it’s time to prioritize some loans over others. Choose the ones with the highest interest rates to pay off first. Over time, high interest rates only add to overall indebtedness. Paying them off quickly will take a big load off monthly expenditures.

Once the basic strategy for repayment is figured out, pledge a minimum amount to pay back each month. The goal of a minimum payment is to keep the amount owed from growing because of missed payments and swelling interest. Think of it as braking to slow down a car on a disastrous path downhill. It won’t stop the vehicle, but it will make the damages a lot less worse.

 Have a Plan B

Even when there are so many loans to be paid off, it’s important to save a small amount each month for emergency use. It’s not easy for the indebted to secure funds in a rush. Don’t expect this emergency backup to be huge. It should be just enough to cover small but necessary expenses. Start working towards an emergency fund of about $1,000.

 Good habits go a long way

Never, ever wait to repay small fees and charges. Pay them back right away to maintain good credit on your positive accounts. Also, learn to use credit cards less often so there’s less to pay as interest each month. Paying off loans completely is a long and arduous process. Therefore, maintain good monetary habits and don’t be discouraged. If needed, secure the services of a financial advisor, but make sure he or she offers only independent advice.

Posted in: debt help

Comments are closed.