Many people think that once their personal loan application got approved, they can already get all the benefits of it. But, in reality, the most common use of personal loans is that they are being used by people to pay all their existing debts.
Sometimes it is advisable not to apply for personal loan if you are just going to use it to consolidate or pay for your existing debts.
Poor budgeting is the cause of these chalking up debts from personal loan that is why it is better to follow what expert says to avoid situations like this.
Here are some pieces of advice that could help you avoid chalking up debts from a personal loan:
- Borrow less. This is a very sensible idea to avoid future debts. But, there are people who take out a lot of money than necessary. It is very important to borrow what you think you can repay in due time. Future financial problem may occur once you borrow a big amount of money then your payouts is not enough to pay the monthly dues. That is why financial expert says that borrowing less is much convenient because it gives assurance that you can repay the lender in a short period of time. It is very important to know that every loan have different equivalent interest rate. The moment you borrow less, the chance for you to pay a low interest rate.
- Each month you have to pay more. It is normal that you get a bill from the moneylender about your personal loan payment each month but paying a minimum amount is really a big mistake. You need to pay more each month so that you can save massive amount of money in the interest alone and once you do it, you will not wait for a long time just to finish paying your personal loan debt.
- Paying on time is good. It is very important to always pay your personal loan on time because failure to comply on that may result to unnecessary charges. Not paying on time can also result to bad credit history statement. Not just for personal loan application, you should also keep in mind that every time you apply for certain things like mobile phone plan, credit cards and car insurance it is always a requirement of the lender to check on your credit history. That is why it is very essential to pay all your debts on time.
- Always check your credit history report. This document is very important because through this, the money lender can have the idea of your past credit history for them to decide how much they can lend and charge to you.
- Pay your outstanding bills. Future financial problem may arise if you have an outstanding bill regarding another personal loan you applied with different money lenders. You have to clear it first so that you can renew or apply to a new lender. If you will not pay your outstanding bills, interest rate will going to increase and once it happened it will stuck on you head and might cause you too much financial burden. Experts say that it is better to clear off every outstanding bill to avoid chalking up debts from personal loans.
Read more: about the pros and cons of personal loan