Paying off your personal loans quickly is a great goal, but many people do not believe they have the ability to do so. You do! All you really need is the appropriate strategy for the type of loan you have. Any other excuses are not valid. You can definitely do this. Let’s take a look at some of the smart strategies for paying all different types of personal loans.
According to Dave Ramsey, personal loans should be attacked using the snowball theory by paying off the smallest loan first in total. After you have done this, then move your attention to the next biggest loan. This will keep your morale flowing, so you will never become tired at the prospect of paying off debt. Half of the battle is keeping your spirits up so you will continue to put money towards your financial freedom.
Installment loans are a great way to take out money, and they are also a great way to pay back money. The installments you create should improve your cash flow, so you will be able to create an ongoing cycle of money that goes in and out. In this way, you can continue to pay bills while you lower your principal at the same time.
Secured loans, or loans that involve collateral to ensure payment, carry with them some additional risks. While delinquent unsecured loans run the risk of damaging your credit and could eventually result in a lawsuit, secured loans carry the additional risk of a reposession, and should be prioritized in your debt payoff plan. Definitely take into account the value of what you’ve put forward as collateral and use that to motivate yourself to make your payments on time.
A cash advance is usually the most expensive kind of loan you can get. According to Power Finance Texas, if you have a paycheck coming, then the cash advance may actually be the tool you need to start the snowball off on the right foot. Do the numbers. Do not be lazy, and you will understand whether to use this financial tool or not.
Short Term Loans
Short-term loans tend to have the highest interest rates, so pay these off first. If you have any loans that are attached to an asset (i.e. a car title loan), make sure you get these out of the way immediately. If you are using the snowball theory mentioned above, this is where you start. Your short-term loans should be bridge loans anyway, so they should be smaller than the bigger loans you will pay off later.
Follow the tips above as best practices if you want to pay off your personal loans more quickly than ever. Use good financial sense to keep from going into debt in the future, and you will have a financial life that will benefit you from now on.