Let’s be honest: Many people borrow as part of their financial plan. For example, they borrow to buy a home, pay taxes, finance personal interests, cover business costs, college educations or other expenses.
Some of these expenses are planned, while others are not. And it doesn’t always make sense to borrow a lump sum. As a result, over time people may end up with a cumbersome mix of mortgages, home equity loans, student loans, credit cards and personal loans.
This piecemeal approach to borrowing can result in suboptimal loan structures and pricing, which may create challenges with matching cash flows to debt payments. Furthermore, taking an uncoordinated approach to borrowing can impede your ability to stay the course of a well-thought-out investment strategy.
To avoid this, consider periodically reviewing your debt structure. Taking a holistic look at your various sources of debt could potentially help you identify opportunities to:
- Reduce interest costs
- Enable faster debt repayment
- Access additional sources of liquidity for unexpected cash needs
- Better manage cash flows