When it comes to short terms loans such as payday loans, you need to have a clear plan on how you are going to repay them in order to avoid running into financial problems. Defaulting or missing payments are actually one of the main factors that make paying short term loans more expensive. If you want to maximize your short term loan, then you should avoid defaults and late payments at all costs. The following are some of the top tips on making sure that you always meet your monthly short term loan repayment obligations.
1. Borrow only the amount that you can manage to repay comfortably
Remember this tip when applying for any type of loan, whether short-term or long-term. Just because you qualify for a certain amount it doesn’t mean that you need it. The rule of thumb is to make sure that your monthly loan repayments do not exceed 10% of your total net monthly income. While you can adjust the amount if you have other sources of income, the point is to make sure that you can comfortably manage to meet your loan obligations without interfering with your other monthly expenses. If you are applying for short term loans for bad credit, then ensure that you are able to comfortably repay your loan on the next expected pay date to avoid incurring any additional interest charges and late fees.
2. Plan to repay your loan early to save on interest charges
Short term loans offer a very cheap source of short-term cash provided that you are able to pay them within the shortest time possible. The longer you take to settle the loan, the higher the costs will be. Many people make the mistake of picking the maximum repayment term as they are enticed by the lower monthly payments. Consider choosing the shortest repayment term that you can afford. If you are in a good position to do so, repay the loan earlier than planned. However, if you are planning to settle the loan early, you need to watch out for early repayment fees. Certain short-term lenders tend to charge early repayment fees in order to deter borrowers from completing their payments earlier than agreed. However, remember that you have always have the option of paying off your loan as early as possible without incurring any additional charges when you opt for a reputable lender.
3. Pay on time
While it is understandable that not everyone can afford to pay off their loans earlier than expected, it is important to ensure that you always make timely payments. Besides interest charges, lenders earn a lot of profit through late fees. Consider placing a standing order with your bank to make sure that you don’t miss any payment. A standing order can be very useful for borrowers who are often busy or tend to be forgetful. When you choose to take a loan that you can manage to repay comfortably, then you shouldn’t have any issues making timely repayments.
4. Adjust your lifestyle
If you realize that paying off a short term loan has become a financial struggle even with a longer repayment term, then it’s time to make some lifestyle changes. If you are having loan repayment problems, then it will be very difficult to maintain the same lifestyle. You need to minimize unnecessary spending such as out, weekend getaways, and so on. You may not necessarily have to make any drastic changes, especially considering that many people incur these unnecessary expenses without even realizing it. All you need to do is to track your expenditure and find out areas where you might be bleeding money and refocus the funds to repaying your loan.
5. Always be on the lookout for extra income
If you are struggling to pay your loan, then you should try to find extra sources of income. The main point here is to ensure that you settle your loan within the shortest time possible, if possible, in advance. You should direct any windfall gains you receive, including bonuses, tax refunds, etc. towards paying off your loan rather splurging on luxuries. Even so, remember that you can not manage the same luxurious lifestyle if you are struggling with your loans. It is important to use these windfalls wisely. Even if you pay a little bit extra when you pay in advance, it will minimize your interest payment and also give you peace of mind.