If you have taken out a loan before, you would be familiar with this feeling – the mental stress of having to budget the loan repayment amount every month into your fixed expenses.
If you are heavily in debt with multiple loans, it can be depressing as it’s tough to imagine when you can finally be debt-free.
That being said, don’t give up – you just need to take consistent baby steps, be disciplined and be determined to achieve your financial goals. While you’re at it, check out these seven loan repayment tips below that can help you repay your loan more quickly and avoid accumulating debt.
List down your monthly income, fixed expenses such as rent or mortgage, as well as variable expenses such as living expenses, utility bills, and so on.
Analyse which are the necessary expenses and trim down the unnecessary ones. Factor in your loan instalment too. Then, analyse if you would still be able to have some savings after accounting for your expenses and loan repayment. It is important to have a buffer in case of emergencies.
During the period when you need to repay your loan, try to cut down on indulgences such as dining at expensive restaurants. You can always reward yourself once your loan has been paid off in full.
This method will help you to prioritise your loan repayment so you can clear your debt more quickly and keep your finances healthy.
It can be tempting to apply for another loan if you run out of cash again before you’ve fully repaid your loans.
However, do your best to avoid taking multiple loans as it can cause your debt to accumulate and spiral out of control. It can also be incredibly stressful to manage multiple loans and repayment deadlines. You might end up overstretching yourself and risk repaying your loans late – which would incur hefty late interest and charges.
Make sure you set reminders to pay your loans on time for every instalment. Late repayment with a licensed money lender will incur late interest of up to 4% a month (imposed only on the overdue amount) and a late fee of up to $60 a month for every month of late repayment.
If you have a problem repaying your loan, talk to your money lender so you can work out a revised repayment plan that works better for you.
We understand it can be very tempting to splurge on luxuries to reward ourselves when we just receive our bonuses or have some extra funds in a particular month.
However, it is important to think longer-term. Whenever you have additional cash, try to make an additional payment for that particular loan instalment or even pay off the outstanding loan amount in full. Paying off your loans earlier will also mean you pay less in total interest.
But before you do so, remember to check with your money lender if there are any early repayment fees and how much the fees would be.
If you have multiple loans, aim to pay off the loan with the highest interest rate earlier.
You may follow these steps until all your loans are cleared:
- List down all your loans in descending order of interest rates.
- For the loan with the highest interest rate, try to either pay it in full or pay a bit more every instalment so you can clear it earlier.
- Ensure that you are still able to pay your other loans on time.
- Repeat steps 2 to 3 for other loans, one by one, until all your loans have been cleared.
This is another way to shorten the loan tenure. If you can afford to, instead of making monthly payments for your loan, try paying the same amount fortnightly so you can clear your loan faster.
You will pay less in total interest. Discuss with your money lender to find out if they would be keen on this arrangement.
This mode of payment might also be suitable for those who receive their pay daily or weekly, such as private-hire drivers.
Securing a debt consolidation loan from a licensed money lender can help you pay off all your outstanding loans in a streamlined manner.
A debt consolidation loan helps to combine your multiple loans into a single loan so that you only need to make one monthly repayment to one lender instead of having to juggle multiple repayment amounts and deadlines every month. It’s even possible that you’ll enjoy a lower interest rate than your existing loans.
It is also more cost-effective than using a credit card’s cash advance facility, most of which charge around 28-30% interest per annum in finance charges. Imagine if you have multiple credit cards — how much interest will you be paying to the banks if you can’t repay your loans on time?
Taking a loan from an authorised money lender is likely to be the more cost-effective choice. The faster you pay off your loans, the more savings you will enjoy in the long run. Your emotional and mental health will also improve.
When you take out a loan, be a socially responsible borrower and only borrow what you need.
A good and responsible licensed money lender will also do their best to understand your needs, budget, and discuss with you a loan repayment plan that is suitable for you so you can manage and repay your loans on time.
Our friendly loan officers at Soon Seng Credit will be more than happy to help you. They will also be able to give you some financial management tips so you can pay off your debt as quickly and easily as possible.