Repaying multiple loans – Which one should be paid off first?
By Joseph Samson
Print    Email    RSS   

Gone are the days when people used to save money for years to buy things they liked. The young generation today finds more comfort in purchasing assets on credit. This is why more and more young people are seen approaching banks for various kinds of loans, just to own things quickly. Owning a house at a young age has become the trend amongst the urban youth. Cars are no longer an asset but have repositioned themselves as a necessity. Plastic money (credit cards) has almost faded out the concept of carrying cash in hand.

Banks also realize this trend and thus often come out with appealing schemes which tempt people to avail loans, considering the fact that getting a loan is no longer an ordeal. But, all kinds of loans are debts which have to be repaid, with interest. This creates a trap for people who later find themselves surrounded by multiple loans. Nowadays, it is common to find people who have several debts to pay off. And thus arises the big question- Which loan to repay first? had recently conducted a poll on similar grounds. Consequently, majority of readers were found to have opted to repay the loan with the highest interest first.Poll results showcased a majority of 62.9% people preferring to pay off the loan with the highest rate first. Only 3.23% people placed their stand as being situation specific.

First, repay loans with high interest rates

As a general rule, repaying the loan with the highest interest rate is a good idea. When surrounded by several debts, repaying the one with the highest rate will help to avoid stocking up extra interest rates. Over a period of time high interest rates can add up and have a snowball effect. It means that one should repay the high interest loan first, while making minimum payments on other loans.

Smaller loans - Pay next

At times, what seems sensible does not appear to be the most profitable option too. This tempts many people to repay the smallest loan first. People do this because by paying off smallest loans first, they get a sense of relief. This can be attributed to the fact that by repaying small debts first people reduce the total number of unpaid loans, which gives them a feeling of progress towards repayment of their debts. But, the practice of paying small loans first despite having a high interest loan pending should be avoided.

Don't keep financial matters dependent on the situation

Borrowers should always have a clear cut plan as to how they will repay the loans and manage their finances. Uncertainty in financial matters can lead to ugly situations like hypothecation of assets or having to deal with loan recovery agents. To avoid this, never leave matters relating to loan repayment contingent, instead preplan your action.

Refrain from taking multiple loans

Loans are debts and no matter how tempting an offer looks, one should avoid taking many loans at a time. If there is an urgent need, then cut down on luxuries and other expenses and focus on repaying an existing loan first. This way a person can maintain his/her dignity and also fulfill his/her desires.

(Comments Posted : 1709) Post Your Comments
1. online payday advance online payday loans no credit check online payday online payday
Quick Loans (Posted: Feb 11, 2018)
2. best college essay best essay writing service essay writing best essay writing service research report research report best essay websites research writing fast payday loan best payday loans fast payday loan cash advance no credit check payday loan direct lenders payday loans online direct lender no credit check loans instant online loans
Jamesbal (Posted: Feb 11, 2018)
3. online loans no credit check instant approval same day payday loans online same day payday loans online same day loans direct loans payday loan lenders cash advance lenders payday loan direct lender student doing homework college paper can someone do my assignment research paper webcam amateur chat sex sex chat boob cams free webcam sex chat free webcam sex porn shows free webcam sex chat
Jamesbal (Posted: Feb 10, 2018)
Show All Comments
 Select a product:

 Select a product:

Loan against Property: A shoulder to rest...
Know your home loan better
Home loan rates likely to remain stable
Admissible deductions under Section 80C
Tax Deduction on HRA (House Rent Allowance)

PINJORE: CaℒL Giℛℒs In PiNjOrE 09915787550...
PINJORE: CaℒL Giℛℒ In PiNjOrE 09915787550...
how to gate my home loan certificate

Canara Bank earned a profit of 60%. Feb 6, 2015
New Branch of Laxmi Vilas bank at Vijayawada Jan 30, 2015
Home loan EMIs expected to drop down Jan 21, 2015
Corporation Bank received MSME banking excellence award 2014 Jan 19, 2015
Home loan rates set to fall, after reduction in repo rate Jan 16, 2015
News Archive