Are you struggling with loan repayment? Are you stress out with servicing the loan that seems never ending? Here are the top 5 tips that can help you with not only timely, but even early, loan repayments:
Know your Lender
Before taking a loan, always take the extra efforts to know who the Lender is. This is especially crucial as the lending practices of regulated and unregulated lenders are very different. And you don’t want to invite or find yourself under any undesired practices of unregulated lenders especially in handling your repayments. Always look to the regulating body and if they have a formal list of Lenders under their surveillance; e.g. the List of Licensed Moneylenders in Singapore.
Know your Loan Affordability
Before taking a loan, find out your monthly savings or net surplus; deduct all your regular monthly expenses and budget for unforeseen and adhoc expenses from your monthly income. Then set aside an emergency amount and savings for future cash flow needs (ie Loan Affordable Sum). The Loan Affordable Sum is the amount you can use for monthly repayment. Do not commit to any loan that put you beyond the Loan Affordable Sum and this will keep you away from potentially facing a debt trap or spiral.
Consider Loans with Flexible Repayments
Not all loans allow flexibility in repayment terms. A flexible repayment enables you to repay a higher than the scheduled repayment amount. The excess amount are then applied against outstanding principal of the loan and thereby reduces the time you need to repay the loan. A revolving credit is one such loan with flexible repayments but they typically come with a higher rate of interest. You need to assess the likelihood of you being able to repay a higher amount so as to reduce the time to repay the loan. Otherwise, you may end up incurring more interest with such loans.
Refinance Loans with Lower Interest
The lower the rate of interest, the lower the loan will cost. The lower the interest, the higher the proportion of the monthly repayment or installment will go towards reducing the outstanding principal of a loan. This will shorten the repayment period. Where possible, go to a Lender that offer a lower rate of interest. Nevertheless, you must also keep in mind the refinancing or switching cost.
Consider Additional Income
Consider other income sources to help you ease off and speed up the repayment. Every income, however small, will add up in managing the repayment process. But never use the extra income to take on further loans. Always work on reducing the existing loan before considering a new loan.
These top 5 tips will definitely assist your efforts in repaying a loan. They may get you to even shorten the process; early repayment. Make sure you keep in touch with the lender always. Should you be in need further information, please feel free to contact our loan consultants.