Do you have a loan and do not know how to pay off the debt efficiently? Decision making should be based on reliable information and the experience of users who have already gone through this experience. Next, we will study the pros and cons of the decisions you can make in the process of repaying a debt.
What is the repayment of a loan?
The repayment of a loan consists in the return of the capital that was granted to you. The habitual thing is to pay quotas with a periodicity that can be monthly, quarterly, etc. Each installment covers part of the loan and interest generated in the time that elapses from the previous payment. We review the main forms of financing:
French amortization method
This method of financing is the most widespread. It consists in paying the same fee in each period, for which the amortized capital and interest vary. When you apply for the loan, you receive an amortization table with the fees that you will have to pay , although with this method they are always the same. Therefore, this table turns out to be a mere formality in the French method.
For the client, this amortization method is the easiest to understand. You have a fee and a date – the same day of the month – for each payment. It has no loss, right? However, you will always have to face the same payment and this may be inconvenient in some months in which it costs you more to get to the end of the month. If you have a regular source of income and other expenses, you must have liquidity to pay the fee for this financing method on the date agreed in the loan contract.
To repay a loan, this method will allow you to pay a reduced fee at the beginning, but this amount will grow over time. The main advantage of this method is that you will have months to plan your payments. You need a regular source of income to pay off the debt efficiently. While the first few months will be affordable, the following months will become tighter. But you have time to save money with this method of financing.
Another way to repay a loan is to pay more at the beginning, but less at the end. It does not seem ideal, but if you think about it, it’s like paying a high fee for a service. As the months pass, the fee will be reduced and you can maneuver more freely with your finances. With the amortization table of the loan you will be able to know the amount of the installments and plan the first payments. With this method it is better to have savings so as not to fail in the first months.
How to repay a loan successfully?
You must act on two fronts to settle a bank debt without failing with the installments. On the one hand, planning your expenses and income is key to knowing the margin of action you will have with your money. If you have a business running, this step will be even more important. On the other hand, if you are an employee, you will have to count your salary to cover the fees plus your personal expenses. In both cases, you should always have an extra to not complicate at the end of the month.
Economics experts recommend undertaking an activity or expanding a business when a loan is requested. If you start from scratch, you will have more uncertainty, but if you already have a time with an activity and know how to handle yourself, you will have clear what you can expect to generate as monthly benefits. If that covers the installments with ease and you hope to increase profits with the investment, you are on the right track.
When not to ask for a loan?
Now that you know what it is to repay a quick loan with ASBEF , you can understand when it is not convenient to apply for financing. If any of the following cases describe your financial situation, it is better to avoid financial aid:
- You have an unstable economic situation.
- You have no fixed work or prospects – opportunities – to get one.
- You believe that your economic situation will be changing in the coming months.
- You already have bank debts that you must settle.
In any of the above cases, it is discouraged to increase the debts that must be paid. Loans 24 hours can help you stay afloat in specific situations, but they are not a source of regular income. Therefore, it is an extra help to get to the end of the month on specific occasions. Sometimes, it is better to avoid generating more debts by paying the pending fees with a little help.
It is possible to write off a loan before the expiration date of the loan. In addition, financial institutions allow you to save interest with this option. Before hiring one of these services, you can consult the options of early amortization in the entity. This option is interesting if you have enough margin to save as you pay the fees. This condition is not always met, but if your economic situation improves, it will be advantageous.
You can also write off part of the debt early. The entities allow you to deposit money in the account assigned to collect the fees. For more information, ask about this option to the entity that lent you the money since the steps vary from one entity to another. If you save part of the interest, you end up paying less money in the long term.
Should you amortize before the loan expires?
Deciding when to write off a loan is not an easy task. There are several factors involved in this process, such as your liquidity and the next expenses that you will have to face. Also, keep in mind that if you write off your debt in full you could end up with an overdraft in your accounts. Therefore, you should study this option carefully. Depreciate or not ?, that’s the question.
My recommendation is that, if you can amortize and save interest, do so as far as possible. You can also pay a couple of installments at a time to reduce the debt with less interest. The online microcredits of up to € 750 of the entity Tweedledum and Tweedledee can serve to support you in those months in which you walk shortest liquidity. You also have loans if you figure in ASBEF . You will receive the money in your account in just a few hours.