With the introduction of the small loan app concept, getting a quick person has become quite easy. These apps eliminate the hassle of going through lengthy paperwork and other loan formalities.
Since it is so convenient to get a fast loan, more and more people are availing of it. However, many fail to repay the borrowed amount on time, which increases the penalty rate and also puts a dent in their credit scores.
The article will list some hacks to help you manage small loan debts.
Tips to manage small loan debts:
- Use a loan calculator.
Using a loan calculator, you can figure out how much a particular will cost you overall. It will help you know things like how much money you need to save daily, weekly, or monthly to be able to successfully repay the whole amount.
It will also give you a clear idea of how much you can borrow. You can access an online loan calculator for free.
- Know your debt-to-income ratio.
The debt-to-income ratio draws a comparison between your annual profit and the annual debt amount. If the ratio is above 1.0, it is safe for you to go ahead and fill out that loan application.
If it is below the 1.0 mark, you must avoid taking that loan. If you choose to go ahead with a low ratio, you will have problems paying off the debt.
- Don’t take the first offer.
Many online loan apps provide instant credit. This is why you must take your time to explore each option and pick the one that suits your needs the best.
Consider factors like the loan amount, interest rate, loan tenure, EMI rates, and more before hopping on board. Yes, it will take some time, but it can help you save a significant amount of money.
- Research more
Once you have a few suitable options, compare them all to see which one is the best. As mentioned above, look for things like loan amount, interest rate, loan tenure, repayment structure, and more. Also, keep an eye on the hidden charges that some of the companies might have. Dig out all the information that you can get about the lender before taking the loan. You can always refer to the testimonials from their previous clients to get a better idea of how things work.
- Borrow only when you need to
Online loan apps will offer big loans with higher amounts at low-interest rates. However, you must not get tempted to go for a higher amount. It is always beneficial to stick to the amount that you need. A higher amount will result in a longer tenure or a higher monthly EMI.
The Bottom Line
Online loans are easy to acquire, but you must have a good repayment strategy to be able to successfully repay the amount and avoid penalties. Remember to use loan calculators, compare the offers, check the debt-to-income ratio, and borrow what you need. Now that you know the hacks, it’s time to borrow smartly and avoid the debt trap.