How to Manage Your Debt in a Healthy Way

Friday, April 12, 2019

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Having some debt is an entirely normal part of financial planning but it is absolutely vital that you know what you are doing before you take any debt on. While there are many benefits to taking out a small loan, debt can also turn into a slippery slope if it isn’t treated with respect.

Managing your debt in a healthy way is about finding the right type of loan for your needs, creating a repayment plan you can stick to and using the money in a sensible way.

When is a Loan Right for You?

Finding the right loan isn’t just about figuring out the cheapest way to borrow money, it is also about finding a loan company that is likely to accept you and lend you the right amount. You also need to think about how quickly you need the loan. For example, you might need the money as soon as possible, in which case an online company like Credit Culture could be ideal.

In the most basic terms, a loan is right for you when you are likely to be accepted for the figure you require and you are certain that you will be able to keep up with the repayment plant. All loans come with some interest so please remember to factor this into your calculations.

Creating a Repayment Plan

Before you take out any loan, you must consider what sort of repayment plan you will be entering into. Some loans will require you to start repaying immediately while others may afford you a grace period. Either way, you must make sure that you will be able to repay.

Making a loan repayment spreadsheet is a good way to track your payments and make sure that you are going to be able to completely pay off the loan in time. This does take a bit of organizing and faffing around but once the spreadsheet is in place, it also gives you the opportunity to see how the interest rate affects your repayments.

While we are on the subject of spreadsheets, you should also consider making a spreadsheet to track your budget and how your loan fits in. The more organized you are with your money, the easier it is to manage and make it work for you.

Sensible Uses for a Loan

People take loans out for all kinds of reasons but some reasons are definitely better than others. In general terms, a loan can be a force for good when it allows you to do something essential or the investment return outweighs the interest you are paying. So, let’s say your roof falls in - taking out a loan to repair the damage would be a good idea because this is an essential repair. On the other hand, remodeling your kitchen because you don’t like the color of the cupboard doors is a bad use of a loan.

When you take on debt, the most important thing is that you think carefully before signing anything. Doing the math first is always wise and you might find that you would be better off saving up than taking out a loan anyway.

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