- Date : 06/08/2023
- Read: 3 mins
Debt repayments can be a challenge and, if done incorrectly, can lead to huge losses for the borrower. Learn how to prioritise debt repayments to minimise the interest and become debt-free!
A debt-free life can be the goal of thousands of students, working people and retired individuals across the country. A loan may come into the borrower’s life as a blessing, but it can easily become a never-ending burden. A burden which brings a lot of stress on the borrower’s health, their personal life, and their budget. The best way to repay debt is by prioritising the debt repayment. Learn how to repay the loan with the best techniques and save interest and time!
Highlights:
- Prioritising debt repayments is a process which can help borrowers become debt-free.
- Borrowers must understand that prioritising debt repayment involves various factors contributing to a strategy's formation.
- High-interest method involves making loan repayments for the loans with the highest interest.
- Snowball method involves making debt repayments for the smaller loans first.
What do we mean by “Prioritising debt repayment?”
Prioritising debt repayments is organising your debt repayments to ensure that you pay the least interest, have the least impact on your budget and take less time to become debt-free!
What are the factors to be considered while prioritising debt repayments?
Prioritising debt repayments requires a borrower to create an efficient strategy which can be followed to become debt-free. The borrowers must consider the following factors while strategising:
1. Budget:
Borrowers should understand their budget and savings, which can be used to become debt-free. Any savings the borrower does not need in the immediate future can be utilised towards high-interest loans.
2. Interest rates on loans:
Different loans have different interest rates, and sometimes the borrower can find it better to repay a loan with higher interest buy and take a loan with lower interest rates.
3. Liquidating assets:
The borrowers must evaluate their assets to determine if any of their assets can help them close out a loan. The interest being paid for the loan repayment can easily outweigh the returns from an investment.
4. Understand default on loan:
Borrowers must ensure they refrain from defaulting on loan repayments, as it can lead to a bad credit score, higher interest rates for future loans and legal issues.
Also Read: How to become debt-free with the help of credit counsellors?
What are the methods which can be used for debt repayment?
There are two suggested methods for debt repayment:
-
Higher interest method
The higher interest method incorporates making the minimum payments for all loan repayment and diverting more money towards the loans with higher interest rates.
2. Snowball method
The snowball method focuses on making the debt repayment for the smallest loans. The borrower can pay a minimum amount for all loan repayments and focus on closing out the smallest loans.
Also Read Expert tips for Educational loan repayments!
Click here for the latest articles
Conclusion
Becoming debt-free does not only take money but also an effort to understand the debt and make debt repayments by formulating a strategy. By prioritising debt repayments, borrowers can save a lot of interest and time.
A debt-free life can be the goal of thousands of students, working people and retired individuals across the country. A loan may come into the borrower’s life as a blessing, but it can easily become a never-ending burden. A burden which brings a lot of stress on the borrower’s health, their personal life, and their budget. The best way to repay debt is by prioritising the debt repayment. Learn how to repay the loan with the best techniques and save interest and time!
Highlights:
- Prioritising debt repayments is a process which can help borrowers become debt-free.
- Borrowers must understand that prioritising debt repayment involves various factors contributing to a strategy's formation.
- High-interest method involves making loan repayments for the loans with the highest interest.
- Snowball method involves making debt repayments for the smaller loans first.
What do we mean by “Prioritising debt repayment?”
Prioritising debt repayments is organising your debt repayments to ensure that you pay the least interest, have the least impact on your budget and take less time to become debt-free!
What are the factors to be considered while prioritising debt repayments?
Prioritising debt repayments requires a borrower to create an efficient strategy which can be followed to become debt-free. The borrowers must consider the following factors while strategising:
1. Budget:
Borrowers should understand their budget and savings, which can be used to become debt-free. Any savings the borrower does not need in the immediate future can be utilised towards high-interest loans.
2. Interest rates on loans:
Different loans have different interest rates, and sometimes the borrower can find it better to repay a loan with higher interest buy and take a loan with lower interest rates.
3. Liquidating assets:
The borrowers must evaluate their assets to determine if any of their assets can help them close out a loan. The interest being paid for the loan repayment can easily outweigh the returns from an investment.
4. Understand default on loan:
Borrowers must ensure they refrain from defaulting on loan repayments, as it can lead to a bad credit score, higher interest rates for future loans and legal issues.
Also Read: How to become debt-free with the help of credit counsellors?
What are the methods which can be used for debt repayment?
There are two suggested methods for debt repayment:
-
Higher interest method
The higher interest method incorporates making the minimum payments for all loan repayment and diverting more money towards the loans with higher interest rates.
2. Snowball method
The snowball method focuses on making the debt repayment for the smallest loans. The borrower can pay a minimum amount for all loan repayments and focus on closing out the smallest loans.
Also Read Expert tips for Educational loan repayments!
Click here for the latest articles
