Managing a personal loan can be difficult, especially if you’ve taken one for the first time. Here are four tips to make handling a personal loan a stress-free experience.

Chalk out A Budget

Irrespective of whether you have a loan, having a budget helps you take care of your finances. Managing a personal loan without a budget can create confusion as you may not have a track of where your money is going or how much of it is being spent.

The first step of creating a budget is to categorize your expenses. Start by creating simple, broad categories like “food” instead of “groceries” or “dining out”. Simpler categories make it easier to track expenses.

If you’re unclear about how to create a budget, there are various online tools and apps that allow you to create a simple budget.

Make Timely Payments

You avoid late penalties/fees and damage to your credit score by paying your monthly dues on time. These consequences harm your financial situation and can be avoided if you simply make timely monthly payments.

Creating a budget and setting aside the required amount of money to make your payments is a good way to prevent yourself from not being able to clear your balance. If you tend to forget making your monthly payments, find out if your provider offers an automated payment system.

Consolidate Your Loans

If you’re burdened with multiple personal loans, consolidating your debt could help you in a big way. Consolidating debt means taking out a large loan to repay all of your other loans. You then make a single payment to one provider instead of making several payments to different lenders with different requirements and interest rates.

Debt consolidation is the most helpful if the interest rate you get is lower than the average rate on all your other debts. Ensure you can make payments on your new loan before consolidating debt as it’s likely you’ll have to repay the loan faster.

Monitor Your Credit Score Closely

While repaying a personal loan, keep a close eye on your credit score—how you repay the loan affects your score. Sticking to your monthly installments helps your credit score, and falling behind on them hurts it. Your credit score is important in determining your reliability, which helps you secure lower interest rates and down payments.