Avoid over-reliance on loans and have a plan in place to wisely achieve your goals from your income.
If you are dealing with any type of loan, like a home loan, personal loan, student loan, gold loan, or even a credit card loan, the first priority should be to get rid of the amount. outstanding payment. Remember that any return you earn on your investments, including equity or deposits, will be offset to the extent that you pay interest on a loan. Without debt, your real income on your investors begins and will help you build wealth for the long haul. Avoid over-reliance on loans and have a plan in place to wisely achieve your goals from your income.
So, when it comes to paying off your loan, there are some things to keep in mind. There are 3 key advantages to doing this:
Will reduce the interest burden
Will help get rid of debt completely
Will help create an asset by taking out a loan
Before you start repaying loans, make sure you have an adequate investable surplus to meet your long-term goals. Funds intended for children’s education, marriage or retirement should not be redirected to repaying loans unless necessary.
Start paying off the loans that carry the highest interest rate. The outstanding credit card carries a high rate of around 42 percent per year and, therefore, should be paid off initially. Stop making new credit card purchases until you’ve paid off all charges.
Then look at personal loans, but before you pay off, consider prepayment charges, if any. Any consumer loans that you opt for purchasing white goods such as washing machines or even your smartphones are personal loans in nature. Calculate the interest charges you will save by reimbursing the prepayment charges and processing fees that you would have incurred. If there is more than one personal loan, plan to repay them as soon as possible. The loan nearing completion can be continued while the new loan can be terminated earlier. Likewise, auto credit, gold loans, loans against FDs must be repaid as you have a surplus after factoring in prepayment charges.
Your home loan can be the last pit stop and only focus on paying it off when you’ve gotten rid of the personal loan, credit card fees, etc. A home loan is the only constructive loan because it helps create an asset that has the potential to appreciate in value. Along with this, the repayment of a student loan can be made later, as the home loan and the student loan come with tax benefits that you can enjoy.
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