Personal loans can be a saviour during times of emergency. However, managing your finances and paying EMIs on time to repay the loan can be difficult. It is challenging as you need careful planning and discipline so that you make timely payments without any missed due date.
In this brief guide, we will talk about how you can repay your instant personal loans on time.
Understand Your Loan Terms
First and foremost, it’s important to know all the details of your loan. So, make sure you understand the interest rate, how much you need to pay each month, and any fees or penalties. When you have this information, you would certainly be able to plan better and avoid surprises. Knowing exactly what you owe each month can help you fit it into your budget.
Create a Budget
Let’s talk about the most significant thing first, which is to create a budget. List all your sources of income and expenses. It would provide you a rough idea of how much you can save every month. Make sure to include everything from rent or mortgage payments to daily expenses. With this, you would understand the cash flow and consequently, would be able to allocate a portion of your income towards loan repayment without struggling with your finances.
Prioritise Loan Payments
Whether it is a personal loan, car loan, or home renovation loan, you should always prioritise its repayment over anything. It is because if you have any missed due dates, it is going to damage your credit score. So, make sure you treat your loan repayment as a non-negotiable expense, just like rent or utility bills. This mindset shift would certainly help you stay focused on timely payments.
Set up Automatic Payments
We live in an advanced world where everything is dictated by technology. So, why not use this technology and set up automatic payments to repay your loans? This way you would not have to remember the EMI payment date and you would be able to make timely payments. Most banks and lenders offer this service and allow you to schedule automatic payments to be deducted from your account on a specific date each month.
Cut Unnecessary Expenses
When you have a loan to repay, it is important to ensure that you do not waste money on unnecessary expenses. So, consider cutting back on such expenses. To do so, you can review your budget first and then identify areas where you can cut down. Check if you are spending too much on shopping, dining out, or travelling for that matter. You can also cancel subscriptions which you don’t use frequently. Remember, every penny saved can contribute to paying off your loan faster.
Create an Emergency Fund
Having an emergency fund is very helpful when repaying a loan. Save a little money each month to build a fund for unexpected expenses. This way, you wouldn’t miss a loan payment or need to borrow more money in unexpected situations like job loss, medical emergencies, etc. You can follow the tumb rule for emergency funds and save enough to cover three to six months of living expenses.
Also Read: 5 Tips to Help you Create an Emergency Fund
Avoid Taking Additional Debt
If you have an excellent credit score, you can easily get new loan offers. Though it is tempting to borrow more money when you are facing financial challenges, you must refrain from doing so. Do not take additional debt as it can complicate your repayment schedule. Also, make sure to use credit cards only when it is needed.
Negotiate with Your Lender
If you are unable to repay your loan on time, then you can also negotiate with your lender. You can reach out to them and explain your financial hardship. In such cases, many lenders would be willing to modify the terms of the loan for you so that you can deal with your current financial situation and make it more manageable.
Conclusion
Repaying a personal loan on time requires careful planning, discipline, and commitment. Make sure you follow the above-mentioned ways if you wish to make timely payments and never miss out on any monthly instalments. The faster you repay the loan, the better your chances of financial well-being are.
FAQs
1. What are the penalties for late personal loan payments?
If you do not pay your personal loan on time, you might have to pay extra fees and higher interest rates. With this, your credit score might go down.
2. How can I set up automatic payments for my personal loan?
You can set up automatic payments through your bank or lender’s website. Most banks let you schedule automatic payments so the money is debited from your account on the due date.
3. What should I do if I’m unable to make a payment?
If you are unable to make a payment, you should contact your lender right away. Make sure to explain your situation and ask if they can offer a temporary solution like providing some grace period or adjusting the repayment plan.
4. Can I repay my personal loan early?
Yes, you can usually repay your personal loan early. However, you must check your loan agreement before doing do as some lenders may charge a prepayment fee if you repay your loan early.
5. What are the benefits of refinancing my personal loan?
Refinancing your personal loan can lower your interest rate, reduce your monthly EMIs, or shorten the time you need to pay it off. It can also help you combine multiple loans into one, which would make it easier for you to manage your debt.
