Just as bank loans are very important for growth of enterprises and businesses it is equally important for individual who wishes to avail himself some immediate comfort while paying from future cash flow. It can however be an uphill managing your debt burden ratio more especially in an economy where income does not grow relative to growth in inflation.
The following are a few approach to reducing your debt burden ratio.
Making changes to your lifestyle
One of the most potent ways to maintain effective cash flow when you have debt burden is to make adjustments to your lifestyle. Reduction of avoidable expense like eating out often, subscribing for paid TV when you are not available to watch, giving tips all the time when you make purchases (rather pay with your card to avoid forgoing your change), postpone holidays and vacations or choose a less expensive holiday destination to avoid spending much. Are some of the ways you can keep your spendings within limit.
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Bulk repayment using windfall gains or bonus payments.
You will be surprised how fast your debt burden ratiowill reduce if you adopt using bonuses and unusual gains to pay down on your loan balance. Unexpected income or payments are never part of your projections when you were availed the loan so if you run into them, do not hesitate to use same to pay down on your loan.
You must however be mindful of the options you have when doing bulk repayment on your loan. You may either reduce your installment amount and maintain the loan tenor or shrink the loan tenor and maintain your installment amount. The former help free your cash flow more and the later help you pay off the loan before schedule date.
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Consolidate or merge all loan
Requesting your bank or finance company to restructure your loan by merging multiple loans into one is another option you have when you are burdened with loan repayments. This allows you to have one single repayment amount and date. Single repayment amount on loans allows for planning as well as focus.
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Discuss lower interest rate with your bank
It is expedient to approach your bank and discuss lower interest rate if you have a high debt burden ratio that is heavy and your loan repayment is being affected. Banks will be interested if you prove reduced repayment ability and willingness to abide by the new terms if interest rate is reduced. Every bank will be more interested in a cleaned out loan than a loan with unfulfilled obligations. So approach your bank and discuss possible reduction in interest rate on your loan.
Shop for lower rates in other banks.
There are several banks that will be willing to do business with you if you have good credit history and proven ability to pay. So do not be stocked with one bank. Shop around for lower rates in other banks and request that your exposure in bank A be bought over by bank B if bank B will give you lower interest. You must however be mindful of other charges such as management and other fees. Some banks that pretend to be offering lower interest rates have higher fees that banks that offer higher interest rates.