It is a part and parcel of life to borrow money. There are several needs in a family and to maintain all of them, you may find it difficult at times to make both ends meet. This is when you have to borrow money form others. Now, borrowing has its own benefits as well. That is the reasons some people borrow money too. It can offer you tax benefits; make you a perfect planner for finance management and much more. But, with all its benefits, it must be in manageable proportions so that you can pay it off easily and in time.
Follow The Thumb Rule
When you take loan you must be a little calculative. It is very easy to take loans, sometimes for than you need, but this nature can lead you to dire situations when it will be difficult for you to manage resources and your payments. It is best you follow the thumb rule. It is a simple calculation based on all your debts and its payments taken together and dividing it with your gross income. This quotient should no0t be more than 36% at any cost, otherwise you are in trouble. It will result in non-payment of bills and affect your peace of mind as well as threaten your goal for long term financial managements.
Have A Plan
To avoid such unavoidable situation, you must plan your finance and manage it well. it is good to know where the money is coming from, where is it going and from where will you arrange the money to pay it back in time. Make a list of all your debts, including credit card due. Arrange them according to the monthly payment amount, principal amount due, rate of interest, due date and so on. Also list the amount that you devote monthly for the payment of these debts. Define your goals as to whether or not you want to be totally debt free or reduce it to a certain level. Then calculate the amount of money required to achieve it and find ways to arrange it.
Arrange For Extra Money
When you know the amount of money required, make some amendments in your extra expenses, turn your hobby into income or arrange for a part time job to create a monthly corpus from these extra incomes. Consider taking bill consolidation loans at lower rate of interest through your credit card or home equity which will reduce your monthly interest and also channelize all your debt into one.
Pay On Priority
Prioritize your debts according to the rate of interest and start paying immediately starting with the higher rates. This will enable you to get rid of bigger payments first and save a fair amount once it is paid off. You can also start the other way round by paying the off the lower interest rate loans entirely, one by one. Any extra money saved by this process can be utilized in paying the next one. This way, once you reach to a manageable position, continue to follow the plan and a budget to spend according to your income and stick to a coherent plan.