Managing your loans in recession


In times of recession like we are in now, many people tend to be extremely debtaversed. In fact, they try as much as possible not to get loans or borrow money from finance houses, family members or friends, thereby struggling to live on their incomes.
For people who have had huge loans on their necks before the economic meltdown sets in, the development has indeed made life unbearable for them.
However, it is not the end of the world, as dealing with debt is not as difficult as many think. It only requires both defensive and offensive strategies, because often, your goal is to cut down on the debt you carry.
In order to make sure you offset your loans, it is important to spend less and earn more, and to try to lower your interest rates as much as you can.

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Expert advice
A financial analyst, Mr. Abiodun Esho, advised that you can keep your debt under control through speeding up the process of reducing your debt load, by keeping tabs on your credit. It is always advisable for anyone who borrows money to keep an eye on their credit. But interestingly, there are quite a good number of people, who aren’t even aware of their credit score, forgetting that a person’s credit report says a lot about one’s financial habits.
“If you have loans and many accounts you are running, you will need to know how your debt load affects your credit rating, because the way you manage your debt influences your credit rating, and this is why it is important, because taking care of your credit,can make you eligible for cheaper loans or have the leeway to reduce your loan interest rates.
“If you want to retire your loans as quickly as possible, having a healthy credit history may help you negotiate your way to lower rates,” he explained.

Keeping debt around, while saving the extra money in an emergency fund is not wise, because no matter how big a debt obligation is, the more you refund, the lighter your financial burden is

Endeavor to consolidate your loans
Another way by which you can manage your loan is to consider consolidating your loans, as a way of reducing your debt. You can use a balance transfer credit cards if you are determined to pay your debt before the interest rates rise. Also, you can do your own debt management. What that means is that you can handle your debt issues on your own, because handling things on your own is cheaper; just that a lot of it is simply applying fiscal discipline where you start off by avoiding new debt.
There is really no magic bullet here, because if you really are experiencing hardship as a result of bad debts hanging on your neck, you just have to prioritise.
Try to find out if you can lower your interest rates, maybe you are about taking out a cheaper personal loan to service a more expensive loan. Also, you may be surprised to know that financial institutions may have hardship programs available and that bankers may be willing to negotiate with borrowers, who approach them for guidance.
Another financial expert, a chartered accountant, Mr. Olu Ojo, explained that discerning customers/debtors should pay more than what is required each month, after increasing sources of income.
He said, “If you have additional sources of income, you should think about applying it towards your debt. Keeping debt around, while saving the extra money in an emergency fund is not wise, because no matter how big a debt obligation is, the more you refund, the lighter your financial burden is. In paying a mortgage loan for instance, it is advisable to add extra payments, whenever you can afford it!”

Be picky about the help you choose to get
You can actually do your own debt negotiations yourself, by approaching your lenders directly for assistance, rather than turning to people or experts for credit counselling, because some people decide they need the extra help by reaching out to mini-finance houses or acquaintances, who work in the financial sector, when they feel there is nowhere else to turn. These companies or people may help alleviate the pressure, but you will be paying for offloading the work onto someone else.