Soon after university, people have a year or so before those student loan payment bills start swallowing good chunks of hard-earned pay cheques. Then comes the mortgage bills, car loans and numerous other loan payment bills. Most Australians or New Zealanders are clueless when it comes to paying off multiple loans at the same time. Some choose debt consolidation help ( click here if you need it )which could potentially bring forth more problems, and others end up missing payments and fumbling. Even if you pay the minimum each month, your loan bills never seem to cease. It’s time to think about what you could be doing wrong to make your loan interest rates pile up.
● You don’t track your monthly expenses
Can you tell how much you owe this month on your mortgage apart from your student loan bills without looking at the papers? No is not an acceptable answer. You should keep meticulous records of how much you owe each month to better manage your finances. Draw up a basic expenditure chart and list all loans you currently have and the interest rate for each. Any special circumstances due to a debt agreement or similar conditions should be noted down too. Now, you can easily see which loans cost the most and how much you should allocate each month per loan.
● You prioritize high-interest loans over others
This is a rookie mistake. It might make sense to pay off the property loans with the highest interest rates first. After all, an interest rate of about 25% doubles in two or three years. The problems start when people choose to pay off these hefty loans and ignore smaller loans with low interest rates. You may manage to somehow pay off a massive loan, but you’ll end up missing payments of small loans and defaulting without even realizing. Missed payments on any loan will get you flagged as a financial delinquent. Defaults result in ruined credit scores. You’ll most likely get slapped with late fees and charge offs that make those small loans as expensive as a mortgage. You can easily avoid this scenario by paying off smaller loans as soon as possible. You’ll also feel a great sense of accomplishment once the loan pile gets smaller.
● You don’t push for leniency
Many banks have loan forgiveness and leniency options for debtors under excessive financial strain. Say you took out a $100,000 student loan, but after you’ve graduated, the entry-level job you found barely covers the rent. Your bank could sympathize with your plight and extend your leniency period. Some banks even reduce interest rates or the size of the loan if their client is stuck in a low-income job. Those who work in the public service sector, such as teachers, can petition for loan forgiveness. Ask your creditor if such options are available to you.
Despite how much stress you come under, don’t give up. Don’t end up making stupid decisions either, such as using your house as collateral for your credit card debt. Think thrice before hiring agencies or brokers who promise to settle all your loans in two or three years. Often the service fee they charge is higher than your combined loan payments.