This is definitely the goal – to be able to live debt and loan-free, and not have to worry about increasing interest rates over bills or loans that don’t get paid. Sadly, this isn’t the case for a lot of people. Even in our youth, student loans may already be one of the main contributors to our personal loans that keep adding up. As we progress into adulthood, taking on loans for big purchases such as cars and homes just increase the already mountainous amounts of debt we have acquired over the course of our lives.
The great news is there is a way to go about loans in a smarter way. There are a few ways you can tweak the state of your loans, the amount of interest you have to pay on them, and in effect the overall face amount you have to pay back.
Of course, once you have cleared yourself of the loans, you should work on maintaining a loan-free or debt-free existence – one that lets you breathe a little bit easier, with unnecessary restraints taken off your back. The following are some of the ways you can start:
1. Consider loan consolidation.
If you have a lot of individual loans that are accumulating varied amounts of interest, you may want to consider consolidating your loans in order to lower the interest rates that you are paying overall, and be able to simplify the management of your finances. This is easy to apply for if you have a good credit rating with your bank. Otherwise, it would be best to apply for this well in advance so as not to risk any refusals due to a bad credit rating.
2. Pay everything through cash.
This may sound like such an archaic approach to handling your finances – who wouldn’t want to take advantage of credit cards and the ease at which you purchase things on a daily basis? But paying through cash actually kills many birds with one stone – firstly, you get rid of the credit card fees that you acquire through late payments, underpayments, or penalties; secondly, you minimize fraud and consequently having to deal with or even pay for things you didn’t even buy yourself; and third, you get to inculcate the habit of living within your means, and only spending what you can actually afford at that moment in time.
3. Live in a more suitable household.
This may mean having to downsize, or moving to a better location in order to minimize travel time and transportation costs. It could also mean making sure that your home isn’t leaking off of you by checking if everything is still working and in order – and that you aren’t wasting resources and consequently spending on more than what is necessary.
4. Learn to live within your means.
Living with prudence is your best prevention against accumulating more loans. Get into the habit of living within or even below your means and see how much more lasting your debt-free living can be.
At the end of the day, being able to instill habits of practicality and farsightedness will help you maintain a debt-free life. It may mean living more simply or modestly, but this will also spell a more lighthearted lifestyle for you and your family, when you know you don’t have to worry about compounding interest and liabilities you need to pay. You can then focus on building investments instead.
