Nowadays, it is quite common for people to avail multiple credit facilities within the family. As a matter of fact, there are quite a number of families that have a home loan running simultaneously with a car or a vehicle loan, and if needed they avail a personal loan for any emergency or leisure.
Most of the home and auto-mobile loans are secured while the personal loan is unsecured. With all these loan accounts running at the same time, at times it gets tricky to handle the EMIs with added expenses for the month. One needs to have a clear plan and a strict execution in order to stay within the line and do not end up defaulting on any of the payments.
Personal loans attract a higher rate of interest as they are unsecured, carry an additional risk for the lender, and to keep the borrowers gripped, they come with a flexible repayment tenure.
Most of the personal loans are considered to be an alternative to a credit card as they offer a lower rate of interest and a flexibility while repaying the amount. As a result, the market today is filled with multitude of lenders offering instant & easy personal loans at competitive rates, enabling aspiring borrowers to get access to funds in no time.
Read More: Bank FDs: SBI vs HDFC Bank vs ICICI Bank Latest Fixed Deposit Rates Here; See Details
For all those who are managing multiple loan accounts and find themselves submerged in a pool of debt with no respite, we have come up with a few tips that will help in managing those EMIs and wrap them up in an efficient way. With potent management, one can easily prevent themselves from this vicious cycle of debt and eventually coming out of it.
Let’s discuss these proven tips to manage multiple credit facilities:
1. Pay your loan EMIs prior to credit card outstanding bill payment
In a first, it is highly advised that one pays the monthly repayment amount due on a personal loan before paying off the credit card bill. The reason for doing so is that the default on a personal loan repayment impacts a credit score more than it does when one defaults or delay the credit card bill payment.
As such, when an individual defaults on a personal loan repayment, it is considered as a severe act and can reduce the credit score by approximately 50 points, which is quite heavy. With multiple loan or credit accounts, there is a possibility of missing out or falling short of funds to manage payments within the stipulated time frame, hence it is advised to prioritize the monthly repayments accordingly.
Read More: ICICI Pru Guaranteed Pension Plan Flexi launched – Check features of this new annuity plan
2. Avoid accumulating additional credit card debt
The on ground importance of keeping this in check can not be understated as compared to the previous one. If a person continues to accumulate additional credit card debt without clearing the existing one with multiple loan accounts, then there might be severe consequences in terms of both credit score and interest burden.
In general, credit card interest rates hover at around 40% per annum, and in case of continued accumulation, more debt would mean additional interest burden and higher repayment amount, leaving an individual in a debt trap and no money in their pocket.
