Good tips for getting debt free
Most Norwegians will take out a consumer loan one or more times in their lives. What these consumer loans are used for varies, but the most common is that Norwegians use borrowed money to pay for unforeseen expenses, vacations and other experiences, home improvement and home appliances. More and more people are also using consumer loans to buy a car rather than borrowing traditional car loans. In 2017, Norwegians raised a total of $ 106 billion in loans. This was an increase of over 11% from 2016. The loan amount continued to increase in 2018, and it is predicted that it will probably not stop anything in 2019, despite stricter regulations.
Many are struggling with payment remarks
According to surveys about Norwegians and consumer loans, in 2018 it emerged that as many as 6% (1 in 17) of Norwegians have payment notes and are struggling to pay down their loans. Not only does this have consequences for society, but it also has major personal consequences for the individual. A payment note is a symbol that you are a poor and unsafe repayer. Some of the consequences of this are that you will have big problems getting new loans, this also includes mortgages and car loans. Another consequence is that your debt will be more expensive.
Economic surveys showed that the sum of all payment notes in 2018, ie money owed by Norwegians and had not been repaid, was $ 46 billion. How can you become debt free and avoid a difficult financial day to day as well as burdensome payment notes? In this article we give you some good tips.
Refinance small loans
In practice, refinancing will mean that you take out a new loan to get rid of all your small loans. You might not think that the key to getting debt-free is to take out a new loan, but refinancing is for many a good tool and can be of great help.
Instead of having to pay each month on many different mortgage loans, which you have previously taken up, with different and often high interest rates, refinancing will allow you to have a loan to pay off at a fixed interest rate. The benefit of refinancing is that you get a better overview of what you owe, and since you only need to focus on a loan amount, you will also get a more spacious economy. The extra money you have left with each month allows you to pay extra on your loan, so your loan amount goes down much faster.
Get help from a financial advisor
You can apply for refinancing at traditional Norwegian banks, or from other lenders. Most people who offer consumer loans also offer refinancing. In addition, you want to call a financial adviser where you can explain your financial situation, and together you can make a repayment plan that suits your everyday situation. Financial advisors can also help you apply for refinancing, or generally just give you good tips and advice on your private finances and what you can do to become debt free much quicker than what a repayment plan states.
Prioritize paying down your loan
In order to avoid payment remarks, it is important that you always pay down your loan and keep your payment deadlines. Should you have difficulty paying your fixed repayment amount for a few months, you can apply for a deferred payment, but the main rule of becoming debt free and not experiencing financial distress is that you simply have to prioritize your loan.
Set up a budget
A good tip is that you set up a budget that contains all your monthly income and expenses. Then you will always have an overview and be sure that you can afford to pay off your loan every month. If you see that you are left with extra money in the month after all the expenses have been deducted, it is recommended that you use them to pay off extra on your loan. It may sound boring, but it is more boring to drown in debt and payment notes.
Stricter rules for borrowing
Prioritizing paying down your loans is important no matter what type of loan you have taken up. Many banks and lenders make requirements that you must fulfill before you can get a loan. The standard requirements are that you must be over 20-25 years of age, have a fixed annual income of at least $ 200,000 and have no payment notes. These are requirements that ensure that you will not have major problems either in your daily life or with paying down your loan as soon as you have the loan granted.
The authority has also introduced new stricter rules, such as consumer loans, and these rules require banks and lenders to ensure that potential borrowers have enough financial capacity to handle the repayment and other expenses.
Another smart tip is that you reflect a little before taking out a loan. Would you be able to afford to prioritize the loan every month for some time to come? Do you need to take out a loan, can you save money yourself? A good rule of thumb is that you should never take out a loan that you cannot afford.
“Don’t book another vacation until you pay for the previous one”
Surveys show that Norwegians take out consumer loans to pay to cover the expenses of a wide range of different things and experiences. The reason many people fall into debt and struggle to become debt free is because they take out new loans to cover new expenses before paying off the previous loan.
A good rule of thumb for being debt free is that you “do not book a new holiday until the previous one is paid”. This means that you will not have to take out more loans at a time and put yourself into deeper debt. Paying off a loan is always easier than two. Also, you should not take up new consumer loans to pay for older loans. Then you will never become debt free, and it is very easy to end up in a vicious circle.
Here are 3 quick tips for getting debt-free fast:
- Always pay down on your loan, and preferably a little extra.
- Do not borrow larger loans than you can manage to pay down.
- Do not take out more than one consumer loan at a time.