No matter how much loan we take out, two things are clear – we needed the money, and we have to repay it. Although it is not always possible, it is very good to have a plan in advance, just before you take out the loan, as well as when you will repay it.
However, most often, quick loans are taken in urgent need when all other loans may require a mortgage or too much paperwork, so because everything happens in a short time, we take the loan without having a good and accurate plan of how to pay the debt. Keep these things in mind when taking out a loan:
1. Calculate well how much the interest is
Banks are usually clear about the interest rate, but they express it in percentage. To see how much it is in real terms, convert the amount into real money, base, and interest. This way you will know how much money you will have to return in addition to the money given to you by the bank.
Interest is the most important part of the loan. Through it, you’ll see how expensive it really is. Those with a higher rate are considered more expensive because you need to repay a higher amount at the end of it. Check the link https://www.bestforbrukslån.net/ for more information on this.
2. Check the possibility of early repayment
Some banks allow early repayment, some allow after a certain period, and some do not allow at all. Check the terms to know if it is worth saving extra money on the side to pay off the loan earlier.
The early repayment is valuable because it will save you a lot of money on interest. As we mentioned above, interest is what eats your budget, so being able to cut it down earlier will mean a lot for your budget. If there is a chance for something like this, you must do it. It’s better to save money for you than add more to the balance of earnings of the bank.
3. Check if interest is reduced or written off with early repayment
Although some banks allow for early repayment, you do not always have the benefit of doing so – for example, you have to pay off all the interest on the loan, and you have been a good debtor and you want to pay off your debts ahead of time.
If there is no interest or relief, then it is better to put the money you have extra in a bank and deposit it, and then receive a commission, than to give it without any benefit to you.
4. Check how much money you have left during the month for necessities
If after the calculation you find that you have very little money left for you, try to find a new source of funds or make priorities and ways to save. Unfortunately, this can be bypassed, but not unless you’re a techie who knows what is doing.
You mustn’t leave yourself without the essentials. Try to make sure you got the money to pay for everything. If there’s a problem in providing the funds, you can try getting another part-time job, do some online freelancing work, or find other ideas.
5. Calculate if you have additional funds left
Calculating additional funds with which you can save to repay the loan is a wise thing to do. This means that once you have paid your monthly installments and settled on all the other necessities of life, you have additional funds that you can invest in savings or pay off debt earlier. See more about loan calculations on this link.
6. Pay on time every month
Do this so that the interest does not increase accordingly on the days you are late. There is likely a provision in the contract with which you will have to pay additional interest for each day of delay. The best option is automatic payment, ie, transfer of money from your account to the bank to settle the installment.
If this is not an option for this for various reasons, put a reminder for each month so that you do not delay payment. You can inadvertently miss a whole month, followed by bigger sanctions than interest.
7. Always pay more than the expected amount
You may not have noticed that the interest rate varies over some time. Hence, it can happen that instead of 5%, the interest rate becomes 5.2%, which would mean that your installment is not fully paid. In order not to pay the extra interest due to late payment, always pay a little more than the established installment.
8. Always have a depreciation plan in front of you
The depreciation plan will tell you how much more you have to repay from the principal, how much of the interest, how much more time you have to pay, and how much is the installment each month. It is also good for tracking how much you have paid so far and how much you still have to pay.
9. Increase the limit
If you feel that you cannot pay on time and that you will have high-interest rates, ask if it is possible to increase your credit limit. Or ask to change the depreciation plan and pay longer term and smaller installments.
If you request additional funds and they approve them, keep in mind that next month you will have a larger payment installment, so be careful not to find yourself in an even worse situation next month. See what a limit is on this link: https://www.investopedia.com/terms/c/credit_limit.asp.
These are nine crucial things to know when you’re repaying a big debt. If you’re coping with finding the money, you should be looking into the solutions that we described above. Be sure that nothing will come easy or by itself, so you must work hard to find the money and get rid of the loan.