With so many bills to pay- ranging from mortgage, student loans, credit card debt and personal loans among others, how do you choose which to pay off faster and why? How do you prioritise your debts?
When it comes to paying off debt, we tend to focus on our credit card loans and student loans but not personal loans. This is because they are usually smaller, unsecured loans. However, it is important that you pay off your personal loans as fast as you can. I will be explaining in this post why you should choose to be fast about settling what you owe on a personal loan.
A debt is a debt: Whether it is a personal loan or a mortgage, student loan or credit card debt, they are all debts. A personal loan remains a debt and debts are to be paid off so you should be working hard to calculate and pay off your personal loans as much as you do with your other debts.
Paying off personal debts help you pay all your debts faster: Some experts advise that you pay off your smaller debts first. This is what is known as the debt snowball method which Dave Ramsey Paying smaller loans first helps you to see progress in your debt reduction and motivates you to keep going. Personal loans tend to make up the bulk of our smaller loans so you should get started with paying them off faster and earlier.
Reduce the cost of your loan: When you pay off your faster loans, you end up reducing the cost of the loan as you would have reduced the tenure of the loan. If you can, make extra payments in addition to the regular payments so that you can get to the finish line faster. However, you would have to discuss this with your lender.
Reduced debt burden: It sure does feel good not to have debts hanging over your head. When you pay off your personal debts quick, the debt weight you have to bear reduces. Having less debt to pay has a way of reducing your stress and anxiety.
Reduce wastage of money: Simply put, the longer you take to pay off your personal loan, the more the money you will use and therefore waste in paying it off. Paying it off early also increases the amount of cash you have available to you to do other things.
Being in debt is generally not a pleasant thing and the earlier you get out of debt the better. Remember, do not ignore your personal loans just because they are small loans and do not have high interest rates as the others.