Against the backdrop of the coronavirus pandemic, many borrowers want to repay loans more quickly. Life figured out how to get rid of debts in order not to pay too much in the bank.
As shown by a study by RIA Novosti, the average debt level of the population now stands at about 47.1%. Against this background, Elena Kismina, an expert at the Ministry of Finance’s project on financial literacy, told how to get rid of debts.
Among the main points – to repay loans in turn, from the smallest to the largest. When the first loan is repaid ahead of schedule, then you need to go to the second and send the freed money to it.
With regard to refinancing, it is necessary to study the various loan offers of banks and choose those with the lowest loan rates. Applications must be sent to several banks, and after receiving a response, calculate the cost of alternative loans.
Moreover, it is important to take into account insurance, commissions, and other expenses. It is necessary to compare this amount with the costs that will need to be borne.
“The expert of the Ministry of Finance makes the right recommendations. They are based, inter alia, on psychology. A person begins to believe in himself when there is an end goal, and to achieve it you need to perform several sequential tasks. Obviously, closing the first and smallest loan is easier and faster In addition, it helps the borrower to feel intermediate success and gives more confidence in their actions. In addition, there is an additional amount that can be used to repay a larger loan, “director of sales office” BCS Broker ” Vyach Eslav Abramov.
As for refinancing, it really can help reduce the debt burden. If the borrower has several loans, he can combine them into one and reduce the payment by reducing the rate on the new loan.
However, there are nuances and they need to be taken into account. If more than half of the term for existing loans has passed, then the bulk of the interest has already been repaid, and the body has not yet begun to decline.
It makes no sense to refinance loans if there is half a year or a year left until repayment, Vyacheslav Abramov believes. Also, he said, it is important that the difference in interest rates be more than 2%.
“In my opinion, there is no quick way to get rid of debts except to close all of them, but it is possible to speed up the process,” says Vyacheslav Abramov. – Firstly, you need to optimize your expenses. Often we do not notice that we are overpaying for a particular service. For example, many users of cellular communications and home Internet use the old fashioned way to pay separately for these types of services, although there are already quite a few complex offers that are cheaper. And there are quite a few such examples.
It all starts small, they saved 1,000 dollars there, 1,000 dollars here. In total, during optimization, five to ten thousand dollars or more can be freed. This will be a good help for faster debt repayment.
Secondly, it is worth thinking about increasing income. Of course, this is not so easy now, but it’s worth trying to look for options for part-time work. Well, and thirdly, do not forget about savings in the future. If you do not create a financial pillow, then sooner or later you will again resort to using a loan, ”says Vyacheslav Abramov.
“It is very important under no circumstances to increase the credit load and not to take a new loan to cover existing debts. It is also worth negotiating restructuring with banks for each loan in order to reduce monthly payments or repayment period,” head of the AMarkets research department Artyom Deev.
If debts arose, you need to understand their cause. According to Anna Bodrova, senior analyst at IAC Alpari, payment problems most often arise from the inability to “live within our means” or the emergence of new expense items at the same income level.
According to her, the easiest and most proven way to get rid of debts is to pay off debt in accordance with the payment schedule and try not to take new loans.