6 Tips to Manage Personal Loan Repayments to Pay Off Your Loan Faster

The average Kiwi family owes a whopping $3,776 on their credit cards alone, and this figure doesn't include other debts such as car loans or student loan repayments.

Did you know that New Zealand households owe over $14 in liabilities for every $100 of total assets? If your household is like most, most of these liabilities are likely personal loans.

The good news is that there are ways to manage your debt and pay off your loans faster. Here are six results-proven tips on how to manage personal loans.

1. Create a realistic budget

A realistic budget will help you stay on track with your payments. It should be based on your income and expenses, not just what you can afford. This way, you won't end up spending more than you earn.

But what should a reasonable budget look like? Start by listing your monthly bills, then add additional costs, including insurance premiums, child care fees, gym memberships, etc. Next, list your regular expenses – rent, food, utilities, transport, and clothing. Then, add any non–essential expenses like holidays, entertainment, eating out, gifts, etc. Finally, list any savings goals you have.

Once you have completed your budget, you need to set some targets. For example, if you want to save $500 per month towards your mortgage, you might aim to reduce your spending by $50 each week. You also need to consider how much money you'll need to make extra monthly payments.

2. Cut back on spending

Reducing unnecessary spending is one of the easiest ways to manage your finances. Ensure you don't buy anything unless you need it. Here are a few more tips on cutting expenses effortlessly:

• Shop at second-hand stores instead of shopping malls
• Use online price comparison websites to find the best deals
• Ask friends and relatives for discounts
• Buy generic products instead of branded ones
• Don't use credit cards. Instead, use cash or debit cards
• Avoid impulse purchases
• Keep receipts so you can claim tax deductions when filing your return
  
  

3. Set up an automatic payment system

Paying off a personal loan early is such a financial relief. And there's no better way to realise that feat than to set up an automatic payment system. You won't have to worry about remembering when your next bill is due. Once you sign up for an online service, they will automatically send you reminders when your bills are unpaid. They may even allow you to choose which bills you would like to receive reminders for.

You can also set up direct debits to pay off your debts. These work similarly to auto-payments, but you can choose which bills you want to pay. Direct debits are ideal for smaller amounts (less than $200) because you only need to enter the amount once. However, if you're paying off larger amounts, you may prefer to use an online account.

4. Map out payments to stay on schedule

If you've got multiple personal loans, you'll need a plan to ensure you always make enough payments. To do this, map out your repayments. Determine how much you need to pay each month, then divide these into equal chunks.

The first chunk needs to cover the minimum repayment for the shortest term. The remaining payments go towards repaying the rest of your loans. This ensures that you never fall behind with your repayments.

5. Consolidate your loans

Many people struggle with debt because they have too many different types of loans. If you have several personal loans, consider consolidating them. Consolidation allows you to combine all loans into one loan at a lower interest rate. This makes it easier to manage your payments.

Consolidation usually comes with its terms and conditions. So be sure you read through everything carefully before signing onto the deal.

6. Get help from financial service providers

Finally, you want to seek professional and reliable assistance from financial solutions providers who can help you understand the best options available. You can get advice on what consolidation loan is right for you by speaking to a financial advisor. Or, you can ask your bank for help.

The best advisor may also offer invaluable information sessions explaining the various types of consolidation loans and discuss each option's pros and cons.

Better is your go-to debt servicing partner!

No doubt, personal loans can throw you a lifeline in difficult times, but using them wisely can mean more money in your pocket. You want to pay off the loan faster to build a good credit score and save some cash in interest and penalties. With help from the above tips, you'll soon see your loan repayments drop significantly.

At Better, we take pride in helping our clients stay ahead of their finances. That's why we've built a solid loan repayment calculator so you can easily calculate how much you should be paying back every month.

We're here to help you find the best solution for your situation. So check out our loan repayment calculator today or call us on 0800 666 065.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.