These days, it is quite common for people to take advantage of multiple credit facilities within the family. In fact, there are a number of families who have a home loan running at the same time as a car or car loan, and if necessary, they are provided with a personal loan for any emergency or hobby.
Most home and auto loans are secured while the personal loan is unsecured. With all these loan accounts running at the same time, it sometimes becomes difficult to manage EMIs with additional expenses for the month. You need to have a clear plan and strict execution in order to stay within limits and not miss any of the payments.
Personal loans attract a higher interest rate because they are unsecured, carry additional risk for the lender, and to keep borrowers on their toes, they come with a flexible repayment term.
Most personal loans are considered an alternative to a credit card as they offer a lower interest rate and flexibility in repaying the amount. As a result, the market today is filled with a host of lenders offering instant and easy personal loans at competitive rates, allowing aspiring borrowers to access funds in no time.
For anyone who manages multiple loan accounts and finds themselves immersed in a relentless mass of debt, we have offered some tips that will help you manage these IMEs and close them effectively. With effective management, one can easily prevent oneself from this vicious cycle of debt and eventually get out of it.
Let’s discuss these proven tips for managing multiple credit facilities:
1. Pay your loan EMIs before your outstanding credit card bill is paid
As a first step, it is strongly advised to pay the monthly repayment amount due on a personal loan before paying the credit card bill. The reason for this is that defaulting on a personal loan has a greater impact on credit rating than defaulting or delaying credit card bill payment.
Thus, when an individual defaults on the repayment of a personal loan, this is considered a serious act and can reduce the credit rating by around 50 points, which is quite heavy. With multiple loan or credit accounts, it is possible to run out or run out of funds to handle payments within the stipulated time frame, so it is advisable to prioritize monthly repayments accordingly.
2. Avoid accumulating additional debt on your credit card
The importance on the pitch of keeping this under control cannot be underestimated compared to the previous one. If a person continues to accumulate additional credit card debt without clearing the existing one with multiple loan accounts, it could have serious consequences in terms of credit score and interest charges.
Typically, credit card interest rates hover around 40% per annum, and in the event of continued accumulation, increased debt would mean an additional interest charge and higher repayment amount, leaving an individual in a debt trap and no money in his pocket.
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Posted: Wednesday May 4th 2022, 3:57 PM IST