How do I rejig my budget after availing a loan?

Applying for a loan can prove to be a big financial step and a lot of budgeting and planning goes into it. If you’re applying for a home loan or an auto loan, it’s usually a sign that you can afford the monthly instalments, whereas if you’re taking any form of unsecured loans, it’s usually to meet unforeseen or emergency expenses. Whatever the type of loan maybe, you need to be mindful of your current financial situation by taking your monthly income into account and projecting your future finances in a manner that allows you to repay your loan as well as lead a comfortable life with fewer compromises.

Here are a few tips to manage your budget after you have availed a loan -

Follow the 50/30/20 rule A great way to manage your budget after borrowing funds is the 50-30-20 rule. This rule is divided into three main categories - needs, wants and savings or debt. It’s really simple to follow - all you need to do is calculate your monthly take home salary after taxes and then split it into 3 portions. 50% for your expenses and needs, 30% for your desired expenses and the remaining 20% for your debts or savings. If you’ve borrowed money, then 20% can be focussed on paying the loan off while leading a comfortable life. This can be a great way to manage your finances while leading a quality life where you don’t have to sacrifice as much.

Reduce unwanted expenses Once you have availed a loan, you’ll have fixed EMIs in place for repayment. This means you need to figure out where your money is being spent and if there are any areas where you can cut down on unwanted expenses. You must identify these expenses and take the necessary steps. The first step toward reducing unnecessary expenses is to chart down where you spend your income. Once you’ve done that, it’s easy for you to know if those expenses can be avoided for the time being. Examples of these unnecessary expenses can be - eating out frequently, spending way more than required on online shopping, subscribing to entertainment that you don’t consume regularly etc.

Invest in Mutual Funds Investing in mutual funds can be a smart move to invest any excess money that you may have saved. You can identify a mutual fund that has good return potential and save money. After a few years, when this investment develops into a healthy corpus, you can prepay a part of your loan and reduce your EMI. An online aggregator like Finwisely who can help you identify the best mutual fund options and help you make the right investments.

Consolidate your loans In case you have availed of multiple debts from different lenders and are paying varying interest rates, it’s a good idea to consolidate all your debt into one loan with one rate of interest that works best for you. Debt consolidation is when you take a single, large loan from one lender to repay all your different debts. This can prove to be a good option for you as it results in a lower rate of interest than the average of all the multiple interest rates you would be paying instead. You can apply for instant loans online through Finwisely where you can compare different lenders and what they are offering in order for you to consolidate your debt.

Taking a loan does not necessarily mean missing out on all the good things in life. You can learn to manage your finances in a wise manner, repay your debt in time without defaulting and still manage to save. All it requires is good financial planning, proper budgeting and accounting for large expenses.

Want to know more about how you can manage your budget better? Get in touch with Finwisely to get your first consultation. No charge!

What can Finwisely do for you? From helping you compare and understand your options and recommending financial institutions that will best suit your needs to walking you through the process of applying for a loan or even helping you grow your money, Finwisely can play an important role in helping you meet those large expenses or consolidate debt to pay your outstanding balances easily. Finwisely is an end to end solution that understands your financial needs and gives you the personalized attention you deserve.