Personal loans can be real lifesavers. They are designed to help you cover the cost of things that you can’t afford to cover on your own. As beneficial as loans are, many customers aren’t aware of how to handle them responsibly, and as such, end up in dire straights. If not properly managed, a personal loan can ruin your budget, your credit, and your financial status making it difficult for you to get approved for anything in the future. To avoid the backlash of being an irresponsible borrower, here are some tips to help you effectively manage your small personal loan.
Only Borrow What You Can Afford
Here is the first mistake borrowers make. They apply for a loan, get approved, and accept the offer without even considering their current budget and whether or not they can afford the loan. Sure, there’s a grace period before you have to start paying on it, but whether you have two weeks or a month, if you have too many bills and not enough extra cash, then you won’t be able to pay the loan back as you promised.Therefore, the first step in managing a personal loan is to only borrow what you can afford. You can find quick cash loan rates online to see approximately how much it would cost you to borrow the funds before you ever apply.
Add it To Your Budget
Out of sight out of mind is a common practice when it comes to loan repayments. You’re just so excited to have the cash that you forget all about your obligation to repay. The best way to make sure you don’t forget about what is due is to add it to your budget. Create a line item specifically for this new loan and deduct the monthly or bi-weekly amount from your income so you don’t spend the money elsewhere and regret it later. You might also want to set a reminder on your calendar a day or two prior to make sure you haven’t forgotten.
Make Sure the Funds are There
As most lenders set up automatic debits from your checking or savings account, it is imperative that you make sure the funds are readily available on the date you agreed to. Should the lender try to withdrawal the funds and they aren’t there, this will incur several fees. You’ll likely get an insufficient funds fee from your bank as well as a late payment or returned check fee from the lender. Since some lenders will try to debit your account more than once, this can really add up. So, your best bet is to make sure that you have funds in the account on that day or at the very least that you’ve set up overdraft protection through your bank with linked savings account so that you don’t get hit with all those fees.
Pay More Than the Minimum
Lenders are aware that in most cases, you’re not able to repay the loan in full on your next pay date. They will, therefore, break the balance due and interest up into smaller payments. While making minimum payments is better than not paying anything at all, the longer it takes you to pay back the loan, the more money you’ve lost. Therefore, on weeks you have a bit more money in the bank, contact your lender and let them know you’d like to pay more to the principal balance. This will lower interest rates and get the loan paid off faster.
Personal loans are a modern-day convenience available to many consumers. If you’re going to take out a loan for whatever reason, it is imperative that you manage the loan responsibly. In keeping the above tips in mind, you’ll stay on the right track, save some money, and build a lasting relationship with a lender that will most certainly come in handy in the future.