4 Tactics To Help You Repay Your Personal Loan On Your Terms
You’ve been approved for a personal finance loan. Great news! Now comes the challenge of repaying the loan to your finance provider. Well, after you’ve used your personal loan to fund your holiday abroad, your new car, home maintenance or improvement, to consolidate debt or whatever the purpose may be.
When you do begin loan repayments you are making payments twofold; the loan principal AND the interest on top of this. The principal of a loan is the actual figure borrowed. Interest is then calculated on the principal. Interest is basically the cost of borrowing the principal.
In general terms, the faster you pay off your personal loan the more you will be saving in interest repayments. Sound advice right? Well, read on to see 4 tactics you can take to repay your personal loan on your terms so that you remain in control and on top of your personal finance situation.
Please note the methods below are stated in general terms. Check your own provider’s terms and conditions, regarding loan repayments. For example, some loans incur early repayment penalties.
#1 Increase the repayment amount
Just like everything in life, change happens. Your personal finance situation is certainly not exempt and will highly likely undergo constant change. Consider the following; when you initially applied for a personal loan you may have been in a difficult financial situation, hence the need for a financial kick-start or boost. Now, your situation may have changed. You may have been promoted, started a new job or established another stream of revenue. You’re looking back and realising that you can afford the repayments far easier than you used to. Basically, in this situation the solution would be to increase your repayment amounts. This can be approached in a number of ways (many depending on the terms and conditions of your agreement). You may be able to contribute a lump sum repayment which will reduce the overall amount and cut back the period over which the repayments were initially agreed upon. Alternatively, you may be able to increase the repayment amount you divert to your personal loan on a weekly/fortnightly/monthly basis.
#2 Increase your repayment frequency
Again, depending on the conditions of your loan agreement you may be paying back on a weekly, fortnightly or monthly basis. Now let’s say you are paying back on a monthly basis – that’s 12 repayments per year. If you were to change the frequency to fortnightly payments, that’s now 26 payments over a year, meaning you are basically paying off 13 months’ worth of payments and reducing the length of your loan repayment period.
#3 Do your best to make payments on time, all the time
As stated previously, your personal finance situation is constantly changing. For the better and worse. When agreeing to the conditions of your loan agreement it would be advised to ensure you establish an emergency fund to help cover the unexpected and help in times of need. If you do struggle to meet repayments this can harm your credit record and cause negative impact on your potential for future borrowing. Think down the line; you may need to borrow for a first home, a new car, home improvement or any purpose.
Solution; It would be highly advised to set up your repayments in the form of a Direct Debit. On top of this ensure you always have the required amount in your account to cover the repayment on the due date. It would also be worthwhile setting up the direct debit to fall around your pay day, to help in budgeting purposes.
#4 Consider Refinancing
If each of the options presented here do not suit your terms then the final solution may be to refinance. “Refinancing is the process of replacing an existing loan with a new loan. The new loan pays off the current debt, so that debt is not eliminated when you refinance.” Otherwise known as debt consolidation this is an effective method to consider if you are confronted with multiple forms of debt and you are struggling to meet all of your financial obligations. To put it basically, debt consolidation is where we help you combine your debt, leaving you with one monthly payment. Saving you in the long run on interest repayments. For more info regarding debt consolidation go to https://nzcusouth.co.nz/products/loans/debt-consolidation/
Or to apply for a debt consolidation loan go to https://nzcusouth.co.nz/need-a-loan/