How to create a plan to repay a short-term loan
Many of us will need financial help at some point throughout our lives, especially if we’re faced with an emergency expense that our cash flow cannot contend with. Thankfully, there are lenders that offer short-term loans for this exact reason, like car repair loans, payday loans, and other loans with flexible repayment terms, and approval requirements to suit you. But how can you make sure you’re repaying your loan in full and on time? Creating a plan can be a huge help. Read on to find out how to prioritise your payments to help you manage your outstanding debts.
Before you apply
There are a few things that you should think about before applying for a short-term loan that can help you determine whether it’s the best option for you, and so that you can work out whether you can truly afford the repayment costs. Keeping these factors in mind will help you calculate the total cost that comes with short-term loans.
- Repayment terms: Consider these terms before you make your decision. You should make sure that the lender that you choose sets these out for you clearly so that you can decide whether you can afford to pay the full amount for a set period. This is particularly crucial for short-term loans as they must be paid back over a matter of months. You should make sure you choose a lender that offers manageable terms.
- Interest and fees: The total cost of borrowing is not as simple as repaying the loan amount. You should also consider the interest rates on top of monthly repayments, as well as hidden fees and charges that may all add to the total cost of your loan.
Considering the two points can help you when taking out a loan to ensure that you’re going to be able to pay it off without issue. However, if you are struggling to pay off outstanding loans – don’t worry! Handling your money can be difficult, but there are ways that we can make it a little easier. Here are a few tips on how to make a plan to pay back a short-term loan.
Create a budget
When trying to pay off debt, working out a budget is the best place to start. First, you should get to know exactly how much is going into your account in terms of income. Secondly, calculate primary expenses – this could include mortgage, car finance, and other recurring bills that you can’t live without. Categorising your payments can not only help you to work out how much money you have left over after your bills, but it helps you to identify if you are spending unnecessarily. You can make cutbacks in areas that are not as important, for example, the money you use to eat out or socialise every week and use this to put towards paying off your debt.
Prioritise
Paying off your debt should be a priority and should count as a primary expense. You should make sure you set aside money each month for your repayments before other things that you could do without. Prioritising means you’ll be less likely to miss a payment and be able to pay your debt off in full, and on time – even if that means making changes to save some cash.
Pay your smallest debt first
When it comes to creating a repayment plan, paying off your smallest loan first is another great tip. Smaller loans are more manageable and can be chipped away at more easily than a larger sum – this can help with confidence and will make you feel like you’ve achieved something. However, the best part of this is it frees up money that you can use to pay off your larger debts. This way, you are less likely to be struggling to meet the repayment terms every month – it might even mean that you can pay off more than you need to and be free from debt even sooner than you thought!