How to Properly Take and Repay a Loan

Today, lending services are more accessible than ever before. You can take out a large or small amount of credit for any purchase, from an apartment to household appliances. Moreover, today, you can take out a loan using an application on your phone, such as, for example, the Payday Loans App. However, despite the fairly high popularity of loans, many do not know how to use this service correctly and drive themselves into debt. That is why, regardless of what kind of loan and what you plan to take it for, there are rules that everyone should know.

Calculate How Much Loan You Can Repay

The first rule of a borrower: evaluate financial capabilities before taking on debt obligations.

It is optimal when the monthly loan payment is no more than 30% of the borrower’s income. If a family takes out a loan, it should be no more than 50% of the income of one of the spouses. If the loan payment amount is larger, the burden on the person is higher, and in the event of a decrease in income, they will be in a very vulnerable position.

Consider cases when your financial situation may deteriorate sharply. If, in the worst-case scenario, you can continue to repay the loan without interruption, it is suitable for you.

Conduct an Audit of Existing Loans

If you have existing loans, it is important to audit them, write down what amounts were taken and at what percentage, and find out the amount of overpayment on these loans.

Experts draw your attention to the fact that everything should be taken into account in debt obligations — loans, mortgages, credit cards, and other debts. Accordingly, the debt burden should be calculated so that payments on all types of debts account for no more than 30% of the monthly income of a person or family.

Pay Loans on Time

An important aspect when paying off debts is timeliness. Otherwise, the debt will only become larger, and due to late payments, your personal credit rating will decrease.

Repay Loans Early if Possible

To return the money faster, you can make a plan for early repayment of the loan. Two approaches are usually used:

• Economic — repay the loan with the maximum overpayment or the highest rate and then reduce the amount of the overpayment.
• Psychological — repay small loans in full, one by one; this is how a person sees that each time, there is one less loan, self-confidence, and strength appear to pay off the remaining debts.

Distribute the Budget for Loan Repayments so that Debts Do Not Accumulate

To avoid accumulating loan debt, you should prioritize debt payments, other obligatory expenses, such as housing and communal services, food, and then everything else when planning your budget.

Make a list of your expenses from most important to least priority. When spending priorities are clearly set, there is no chance that you won’t have enough money to pay off a loan or something else important. Immediately after receiving any type of income, you must set aside an amount for payment/payments on loans.