Creating a Strategy for a Quick Loan Payoff

Debt, per se, is not a bad thing. Borrowing money can help you buy the house you want. You can get a new car through a loan. Sometimes, it can help you get through an immediate financial struggle. Whatever the reason behind your debt, you have an obligation to repay it.  The real trouble starts when that repayment does not follow through. You may end up in long-term debt and in a bigger financial struggle.

As such, it is important to have a good strategy for repayment -- the quicker, the better. Here are some tips to help you put together a good strategy to payoff your loans: 

Avoid borrowing more than you make

Most people swipe their credit card or get loans thinking that they can pay it later and that they expect to get a raise or suddenly see a surge in the sales of their business. You cannot live off debt and potential income; it will only make paying for credit difficult.

To make it easier for you to pay off loans, consider your income and determine if something bad happens, will you be in debt or not? The general rule of thumb is that debt at the maximum must be at 40% of what you make, even better if it is at a lower ratio.

The danger of credit is that because you do not physically lose the money or even touch it, is that it plays a trick on your mind that you have not lost any money at all. It is easier to swipe or apply for a loan than saving money and controlling your spending habits.

Create a budget and follow it

Now that you know the importance of keeping debt at a minimum level, the next step you make is creating a budget that you will follow.

Monitor your daily, weekly and monthly expenses to identify which parts of your expenditures you need to improve. Monitoring lets you know where money comes in and comes out. This may be a tedious process, but for someone strapped for cash and in debt, every cent counts.

A budget keeps your spending in check and provides you with a blueprint to keep you debt-free. It also makes it easier and faster to pay off a loan.

Know how much money is coming in

While budgeting can help you control your spending, it is also important to know where your money is coming from and when you expect to receive it. This can help you schedule and prioritize the things you need to pay for. Can you pay the electricity bill due today and the payday loan you took in Ajax out last week within the same pay period? List down your salary and when you receive it and compare it against the due date and the amount of things you need to pay for so you can strike a balance between the two.

Knowing how much money is coming in is also essential if you are sharing finances with your partner. It will help you manage your joint budget together.

Use extra cash or a big windfall wisely

Whether it’s a tax refund, a work-related bonus or maybe even an unexpected inheritance, consider using it for debt repayment. While you may want to spend that money on other things, choosing to use it for your debt payments will give you peace of mind and get you on your way to good financial health.