Tips on How to Manage Debts and Loans Effectively
Debts and loans can either be good or devastating depending on how you use it. Always make sure that you get the best out of your borrowed money.
Borrow for the right reasons.
When you borrow money, you should use it to buy an asset that increases value over time and has a potential to make your money — this is what he calls the good debt.
Borrow only what you need.
If you need P200,000 to start a business, then borrow only that amount, even if you’re eligible for a loan with a higher amount.
Remember that the bigger the amount you borrow, then the more interests fees you pay, the larger your monthly payments are, and the longer you most likely have to pay.
Know how much you can afford to pay.
Check your budget and see how much you can actually afford to pay every month. According to him, you should never assume you’ll have more money in the future, and just work within your current income.
Choose the right loan facility.
Banks and most financial institutions can definitely offer much lower rates. And when it comes to borrowing money, getting the lowest interest rate should be your priority.
Monitor your cashflow, especially your spending.
After getting the money, keeping track of your spending should now be your priority. Be sure that you’re not splurging your borrowed cash on unnecessary or unplanned purchases. Another thing, make sure to always pay on time to avoid extra charges.
Final Thoughts
You can always live life without ever going into debt or applying for a loan. This is the slow and steady way to build your wealth.
However, if you know how to properly use and leverage your finances with debts and loans, then building your wealth can accelerate and grow at exponential rates.
As always, there’s no better choice. At the end of the day, you should always choose the option which makes the most sense to you.
