While debt consolidated loans come as a significant relief for many Singapore citizens, inevitable mistakes can put you into an even worse financial situation. Avoid these mistakes as you make your strides closer to becoming debt-free. Needless to say, many of those taking a debt consolidated loan achieve the goal of financial freedom. Therefore, if you are planning to take a consolidated loan, these are the top five mistakes that you should avoid making.
1. Not Having A Clear Budget
Taking a consolidated loan without a clear budget is a recipe for accidentally squandering the money without your realization. While creating a budget, it may sound a time-wasting exercise for some people, however it will ensure each coin goes to where it was stipulated to go. A budget gives you no chance to over-spend. List down all your monthly expenses to assure yourself that it doesn’t outpace your income. Doing that will ensure that you have sufficient money to pay-out your debts.
2. Taking Loans with Too High-Interest Rates
While a consolidated loan is right, some interest rates just don’t make sense. If you are struggling to manage your credit cards, an interest rate you cannot afford is the last thing you want. There is a likelihood for you to default loans with high-interest rates, which could hurt your credit ratings. Shop around Singapore before choosing which licensed moneylenders to commit to.
3. Not Having A Clear Repayment Plan
Taking a loan without a clear repayment strategy will sink you further into debt. A plan that worked for someone else will not necessarily work for you, therefore, look for one that suits you. If your income suddenly goes down and can no-longer cater for your bills as well as pay your debt, you need to come up with creative ideas that will cut down some of your daily expenses. Alternatively, you should look for ways of increasing your income.
4. Untenable Spending
Unsustainable spending habits are likely to dig you into a deeper hole. No matter how good a deal may look, if you had no ability of purchasing it, do not go into it. Paying off your debt should be your priority over buying unnecessary commodities. Also, work within your budget. If you cannot afford something, work harder instead of spending the quick loan that would have gone into paying your debt.
5. Not Setting an Emergency Fund
During the debt repayment period, if you neglect saving, it will be risky for your future. The best way of safeguarding your future is by setting an emergency fund that will protect you from your future credit card debt. Without it, you will end up into debts from unexpected expenses such as hospital bills, car repairs, or any other emergency events. Develop your safety net by creating a saving fund today.
While there are other possible errors people make when taking a debt consolidated loan, the five mentioned above are the most common. It is easy to make these errors so do be careful. You don’t want to find yourself in a deeper financial crisis