Individuals borrow an amount to achieve their life goals like- car purchase, home renovation, mortgage, or emergency cash needs. However, regardless of why you took the loan, you should pay it back. Delays in payments or missed payments impact credit scores drastically. Likewise, a low credit score or loan default may impact the possibility of future borrowings.
Most personal loans come with fixed interest rates and monthly repayments. You can easily budget and pay. However, problems arise when too many loans demand your attention. It takes a lot of effort to budget and pay loan amounts individually. It is apart from meeting basic lifestyle requirements like- groceries and bill payments.
If you cannot figure out the best ways to manage loan repayments, the blog may help.
Best Ways to manage loan repayments stress-free
The exact sum you pay monthly depends on the credit score, the loan term, interest rates, and collateral. Unsecured loans usually have small tenures than secured loans. Some small loans like Quick loans in Ireland, ideal for emergencies, are easier to budget and pay despite competitive interest rates.
Regardless of the loan type, managing regular payments is not a cakewalk. If you often miss the payment or forget to budget, here are some ways to manage loan repayments.
1) Set up a repayment calendar
Review your credit report and mark dates on your smartphone calendar. It would be ideal to review your credit report every week if you have over 2-3 monthly repayments to make. Having a track of loan repayment dates will help you budget accordingly.
2) Consider loans with high interest first
While marking dates or setting up a budget aside, prioritise high-interest debts always. The reason is- high-interest debts consume most of your monthly budget and impact your credit score.
If you clear debts like payday loans, mortgage payments, student loans, and credit cards on time, your credit score remains unaffected. Moreover, it will help you save less for the upcoming low-interest loans, and you can dedicate more towards your dreams and aspirations.
3) Set up a direct debit
Sometimes, we do not often use smartphones while working or cooking. You may miss the calendar update. Moreover, not everyone is habitual in relying on the calendar for financial progress. However, it is a great practice for financial management; one finds it hard to stick by. If you can relate, there is another solution for timely payments.
You can set up direct debits, which ensure timely payments. In this, the money or the repayment amount automatically deducts from the account on every due date. With this facility, you never skip payments and avoid any missed payment penalties.
However, to ensure smooth direct debits, you must have a debit card that provides the facility. Apart from that, you must have a sufficient account balance for direct debits to work. If the repayment amount is higher than the total amount balance, it may not be an ideal way for you.
Also, you do not need to choose direct debit for every loan; it may impact the savings or bottom line. Choose it only for important and high-interest loans.
4) Consolidate some debt payments
It is one of the smart ways to pay and manage loans. If you have multiple loans in your credit report, like- student loans, payday loans, small loans, car loans, etc., the facility may help you. You can consolidate these loans into a one-time or single loan payment. It reduces the hassle of memorising the dates and helps save on interest costs.
Moreover, you eventually pay low repayment every month. However, debt consolidation is not ideal for every person. It is also a loan that you have to repay in monthly instalments. Identify whether you can manage it alongside mortgage or student loans (if you have any). Individuals with good credit scores may find the deal ideal and achieve other life goals simply by consolidating debts.
5) Check whether you can prepay some
Every other borrower needs a no-cost loan pre-payment flexibility. In this, one can prepay or overpay on a loan without paying any additional fee or cost. However, you may not spot this on every loan or with every lender.
But if you loan up with us for any requirement, you may rationalise the freedom to pay early without any freedom. We do not charge a penny on overpayments. You can do it whenever you want. However, it is ideal to do so on the due date only. It will be easier for you to track then.
With pre-payment, you get debt-free and the freedom to leverage the benefit of interest. You can free up some money and watch your credit score jump.
However, always screen through the terms before paying extra. If lenders charge a penalty, it may impact your credit score negatively. Moreover, the additional penalty may dent your budget.
6) Pay debt with an additional income source
Income is one of the most important aspects that regulate the interest costs and total amount you pay. For example, if your income falls, the interest on the loan increases. Likewise, any positive change in income, like a salary hike and increment, implies low-interest rates. You can reschedule your payments at per low-interest rates and pay less monthly.
You can seek part-time jobs or work as a freelancer – tutor, content writer, food court, etc., or leverage the power of liquid investments to manage loans better. Increased income helps you clear more loans monthly without any additional interest charge. However, the idea seems cool; do not drain yourself. Prioritise mental and physical well-being before repayments.
7) Refinance to a fixed rate at lower interest rates
If you have a variable rate mortgage, but the economy does not reveal any positive sign, schedule a fixed rate mortgage. You can do this by refinancing the loan and getting fresh loan terms.
Here, you can either check the plausibility of the same with the existing mortgage provider or explore private money lenders in Ireland for the best quote. Choose the lender that provides fixed-rate mortgages personalised to your finances and liabilities.
Always ask yourself the below-mentioned things while paying debts:
- Can you comfortably afford a loan with new borrowings?
- Are overpayments impactful in your case?
- Does the existing payment pattern impact the next- goals?
Improvising these aspects will help you choose the right mode to manage and pay off loans. Debts aren’t necessarily bad unless they impact your goals or regular life. Decide right as per your circumstances.