5 Rules Of Financial Discipline: How To Deal With High Cost Lending

by Guest Contributor

The following article is a guest post by Edwin Taivonen. If you would like to write an article for Money Q&A, please visit our Guest Posting Guidelines page.

Should you invest or pay off debt?If you have bad credit or you need money in a rush, you may be forced to deal with high-cost lending. Lenders like this charge high-interest rates because they know their customers have no other options and that they do not have financial discipline. If you are caught in a pricey loan situation, the tips below will help you get through it with minimal difficulties.

5 Rules Of Financial Discipline

Pay More than the Minimums

If you only make minimum payments on your loan, you are going to rack up a lot of interest charges. The sooner you pay down your balance, the more money you will save.

Ideally, you should try making double or even triple payments to cut your long term costs, but even $50 a month will help over time. Do whatever you can to reduce the schedule of the loan so you don’t have to pay an enormous interest rate.

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Refinance the Loan

If you have a chance to secure a lower interest rate, do so. Most people who work with high cost lending do so because they have an emergency. Once you get past that emergency, you can focus on finding a good lender that will lower your over all loan costs.

If you have other debts that you are paying on, you might see this as a chance to go through loan consolidation. Then you can have a single payment to deal with every month.

Note that if you are going to refinance, it should be with a different lender. Your current lender will try to convince you to get lower monthly payments, which means he’s extending your loan even further. You’ll be paying it back for eternity by the time you are finished.

Keep up with Your Payments

High cost lenders are not flexible when it comes to missed payments. They have customers who miss payments all the time, and thus they charge high late fees to cover their potential loss. If you make all of your payments on time, you will not have to worry about paying these extreme late fees. You can focus on making your regular payments and stay on good terms with the lender.

Do Not Take out More Than One Loan

Avoid taking out a second loan if you already have a difficult one to deal with. You may not think the extra money each month will be that significant, but it is going to eat away at your wallet over time. For instance, if you get a payday loan and max out a high interest credit card, you may never see relief from your interest rates. You’ll be left even further in debt.

Put Money away Every Paycheck

In the midst of your loan payments, you need to work on saving money. This will ensure that you do not have to get a high cost loan in the future.

An easy way to do this is to turn your savings into a bill, and then every paycheck, you can pay that bill like you would anything else.

Over time, your bank account will grow more than you might have expected. Then you’ll have “rainy day funds” to spend when the time comes. Best of all, you won’t have to pay anyone back for the money!

High cost lending is sometimes unavoidable when you do not have financial discipline. Once you’re in a situation like that, you have to approach your finances a little differently. Put yourself on a monthly budget, and pay off your loan as soon as possible. Then you can start your life fresh without the weight of debt on your shoulders and no financial discipline.

Edwin Taivonen writes at LocalCashGuide.com, a website where consumers can learn more about various personal finance tips and find reliable lender or an alternative solution. Follow him on Twitter.

 

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This article was written by a guest author. For more information about this author, please see the bio information listed in the article. If you would like to write an article for Money Q&A, please visit our Guest Posting Guidelines page.


Guest Contributor has written 240 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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{ 1 comment… read it below or add one }

Simon @ Modest Money

Certainly pays to practice financial discipline. At the end of the day, it boils down to living within your means and that extends to making financial decisions also within your means and practicing utmost responsibility where debt is concerned.

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