The decision to get yourself out of debt is a life changer if you are willing to make the necessary commitment that goes with that.
We all know that “aaahhh”, feel-good sensation that comes with clearing a loan that has been weighing you down.
Paying off debt can be very frustrating and therefore should be done as fast as possible but also not blindly in a way that it can cripple your finances.
A major reason why a majority of Kenyans end up not clearing their loans and get auctioned in the process is that they still want to live large or maintain their lifestyle despite committing to a huge loan.
Some of the best strategies to pay off your loans faster include:
1. Make additional payments
If you can afford it, make larger payments to cut the principal more quickly and reduce the total payoff time.
By reducing the principal balance, you’re minimizing the duration of the loan period and the interest accrued.
2. Have a budget
Not knowing how to manage finances properly can prevent you from paying off your loans quickly.
You need to have a budget and stick to it.
By planning and understanding your monthly cash flow, you can make some necessary sacrifices and avoid falling off the budgetary wagon.
This will ensure you move faster in clearing your loan.
3. Don’t overthink it
As we mentioned earlier, don’t overwork yourself because it might lead to more trouble.
Pay what you can and try to go the extra mile but don’t overstretch yourself too much because it might lead to a collapse of your finances.
4. Talk to an advisor/ Financial expert
The best way to understand finances is to seek help from an advisor. Like we normally say here at Marketcap Trainers, the knowledge you have got you where you are, and if you need to go to the next step, you need an extra set of knowledge.
Speaking to a financial advisor might show you more ways you can clear your loans, stop the small financial leakages weighing you down and finally, make sobber financial decisions.
5. When income increases, keep expenses the same
If you earn a pay raise or accept a new job with more money, congratulations but stay calm!
Increasing your income is a great way to set yourself up for long-term financial success. But there’s a catch: Earning more money only helps in the long run if you can keep your expenses the same, thus allowing you to save and invest more money each month than you were previously.
Think of it as a bonus each month that can be used to fund your savings goal or pay off high-interest debt. If you can keep your lifestyle at the same level, you can build significant wealth over the course of your career.
6. Create automatic payment plan
Having the discipline to pay your loan on time is a sure way to move fast. Automate the payment and avoid skipping remittance to avoid fines.
Ideally, the money should be pulled the same day you receive your paycheck, so it never even touches your hands, avoiding temptation entirely. Remember “idle” money will always get “a job” there you should pay off your loan before anything comes up.
These are just but a few examples. At Market Cap Trainers, we offer personal finance education, Investment opportunities and other financial services. Just reach us through our contacts: Info@marketcap.co.ke or 0765 093983 for any inquiries.