If you haven’t taken out a loan from private money lenders before, and this is your first time, the process may be intimidating. You may be afraid of missing payments and affecting your credit score. You may even think you might not be able to pay off the loan in full.
While those are quite possible, they are less likely if you can manage your budget well. Here are five ways to include loan repayment in your regular budget, so you can get out of debt sooner.
Assess your monthly income and expenses
The first step is to take a look at how much you are earning each month and how much of your income you are spending. Ideally, your income must be larger than your expenses. This way, you can add loan repayments to your budget.
Include monthly loan repayments in your budget
Once you have taken out a loan, paying it back becomes a necessary expense. For this reason, you must add loan repayments to your monthly budget.
If you do not put repayments into your budget, chances are you will keep on missing them. Put these in your budget so you can prioritise paying down your loan. Be consistent, as any missed payments will negatively affect your credit score.
But if you pay your loan dues every month on time, you are much more likely to get out of debt sooner. Not only that, but your credit score will improve as well.
Minimise unnecessary expenses
If you find that your budget is not enough to cover monthly loan repayments, evaluate your expenses again. You may be able to find ways to minimize your total monthly expenses, especially if you find things you spend on that you don’t really need.
For instance, you find that you have an unused gym membership that costs S$100 per month. You rarely work out or go to the gym.
Maintain an emergency fund
An emergency fund is crucial so you can face any untoward event without running out of money. If you have an emergency fund in place, it will prevent you from having to take out additional loans to cover emergencies.
If it is already in your budget, maintain that emergency fund. It should always have enough money to cover sudden hospitalisations, home repairs, car repairs (if you have a car), and family emergencies. This way, you can still have enough in your monthly budget to repay your loans.
Seek professional guidance
It’s not every time that you can adjust your budget to prioritise loan repayments. If your financial situation is really that tough, you will benefit from professional financial advice. Seek out a reputable financial coach or advisor to help you get out of debt quickly. You will have to pay for their services, but it will be worth it in the end.
Conclusion
If you are a new borrower, make sure to adjust your budget and include regular loan repayments. This way, you can pay off your debt sooner and gain points for your credit score.
