18 Nov A Guide To Successfully Managing Your Loan
If you’re thinking about taking out a loan to pay for travel, car repairs, or household essentials, it’s important to have a plan in place to make paying it back as simple as possible. Falling behind on your payments can damage your credit rating and make it harder to borrow money in the future, so here are some tips that will help you manage your loan successfully.
Schedule your loan payments correctly
When your loan is set up, it’s a good idea to schedule your repayments to match the frequency of your income. For example, if you receive money from employment or welfare each fortnight, you should set your loan repayments to go out fortnightly too. This helps to ensure there is money available to cover each payment. Ideally, set your repayments up to be made within a day of your money coming in.
Know the details
Your lender will let you know how much your repayments will be and how long the loan will take to repay. You might get a printed schedule showing this information. Before you withdraw money from your bank account, always check to make sure your loan payment has already gone out, so you don’t accidentally spend it.
Always pay on time
It’s likely that you will pay your loan by direct debit, but if you’re repaying your loan manually, set yourself a reminder for a couple of days before each payment is due, to give yourself enough time to organise it. If you think you’re going to miss a loan repayment for any reason, contact your lender straight away to see if there’s a way you can make it up. This may help avoid a negative report on your credit history. Be aware your bank may charge an insufficient funds fee if there’s not enough money in your account to cover a pre-arranged payment.
Creating a budget will help you work out exactly how much money you have available to meet all your financial commitments, and how much you have left over for non-essential items. It’s as simple as making a list of your regular income and then deducting all your fixed expenses. ASIC’s MoneySmart website has an excellent online budgeting tool. If you’d like extra help to create a budget, check if you have a free financial counselling service in your area.
Make extra payments
If you have a little bit of money left over in your budget, consider using it to make extra payments on your loan. You might also be able to raise your regular payments. This will help to pay the loan off faster and might reduce the total amount of interest you end up paying. It can also reflect positively on the repayment history section of your credit report.