Quick Guide on Paying Back a Personal Loan
We get it – paying back a personal loan can feel overwhelming. But it doesn’t have to be. This handy guide will give you pro tips and tricks to master your loan repayment like a boss.
First things first, we have to get familiar with some key loan terms so we know what we’re dealing with.
- Principal – The actual amount you borrowed.
- Interest – The cost of borrowing that money, typically a percentage rate.
- Repayment Period – How long you have to pay it all back, usually 1-7 years.
Creating a Repayment Plan
Every journey starts with a roadmap, am I right? Before anything else, plot out a repayment plan ASAP. Here’s what to think about:
- Your monthly payment amount and due date. Mark those calendars!
- If your payments are fixed or get bigger over time.
- When you can slip in bonus payments.
- Setting up autopay for convenience. One less thing to remember!
Be real with yourself – can you actually afford that monthly payment? If it’s a stretch, chat with the lender about extending the repayment period. Trust me, you’ll thank yourself later if it fits your budget better.
Budgeting for Loan Repayment
You need a money plan that makes your loan payment a top priority! Look at your take-home pay – how much can you allocate to the loan after essentials like rent and wifi?
- Max out loan payments in your budget. Debt comes before happy hours!
- See where you can trim expenses to direct more cash to payments. Netflix can wait.
- Save a mini emergency fund in case of surprises. Three months’ worth is smart.
- Use a budgeting app to get a handle on spending. Knowledge is power!
Making Timely Payments
Repeat after me: I will never, ever miss a loan payment. A late payment can torpedo your credit score, get you fees, and potentially lead to loan default. It is not worth it.
Be vigilant about paying on time:
- Mark those due dates in your planner, with a reminder a week before.
- Set up autopay through your bank account to stay on track.
- Always pay at least the minimum monthly amount if you can’t swing more.
- If you’ll be late, tell your lender ASAP to work something out.
Paying More than the Minimum
Minimum payments are great, but when you can pay extra, it saves major money on interest.
Want to see your balance drop faster? Here’s how:
- Toss half your tax refund or bonus toward the principal.
- Round up payments to the nearest $50.
- Whenever you get a financial windfall, throw some at your principal.
- Gradually increase your monthly payments, even by $20.
- If you have multiple loans, attack the highest interest rate one first.
Exploring Refinancing and Consolidation Options
If your interest rate is super high or you have multiple loans, you might look into refinancing or consolidating. This rolls everything into one new loan, ideally with better terms.
Refinance if you can get:
- A lower interest rate
- A longer repayment period for smaller monthly amounts.
Consolidate if you want:
- One single payment versus keeping track of many.
- Potentially better terms by combining balances.
Communicating with Lenders
If you’re struggling to make payments, don’t ghost your lender! Staying looped in can help you find solutions, stat.
Be proactive in communicating:
- Speak up ASAP if you think you’ll miss payments.
- Ask if they offer hardship assistance or deferred payments.
- Explain your sitch and discuss revising your repayment plan.
- Negotiate lowered interest rates or reduced fees if possible.
- Get clarity on modified repayment options. Ask all your q’s!
Certain Lenders are more inclined to listen to borrowers’ concerns than others. At Level Financing, we pride ourselves on being flexible and understanding of our customers’ situations. We also have a quick and easy application process that you can complete online in just a few clicks.
Tracking Progress and Celebrating Milestones
Watching your balance drop is the best motivation to keep chipping away at debt!
- Note each extra payment you make in a tracking app.
- Use a debt payoff calculator to see that light at the end of the tunnel.
- Celebrate repayment milestones with a small treat yourself moment.
- Visualize being debt free – how you’ll spend or invest the extra income.
Be proud – you’re taking important steps to master your personal loan repayment. Stay focused on the roadmap, budget diligently, and communicate openly with your lender. Keep chipping away at that balance – you’ve totally got this! High five; let’s start kicking some debt butt!