If you’re planning to take out a personal loan, then you should know that it comes with the obligation of repaying the fixed amount of monthly instalments over an agreed period of time. As a matter of fact, other than ensuring that you pay your loan on time, making timely loan repayments has benefits as well. This can help to improve your credit score and also help you avoid paying the interest that may be incurred from late repayments.
Regardless if you’re planning to apply for a personal loan in Singapore from banks or legal money lenders in Singapore, you must not only ensure you have the resources to pay your repayments on time but to do your best to stay ahead of your repayment dates too.
Read on to find out the consequences of missing loan repayments, and also tips for you to practice to help you repay your loans on time.
What Are The Immediate Consequences of Missing a Payment?
Late Payment Fees
If you miss a payment, you’ll likely be charged a late payment fee for your personal loan. These fees can accumulate quickly, adding to your overall debt and making it harder to manage future payments. Trust us, you will not want your debt to snowball.
Negative Impact on Credit Score
A missed payment can also harm your credit score. Your credit score becomes lower with points deducted when you miss a repayment.
With a lower score, it becomes more challenging to qualify for loans in future. Banks and licensed money lenders in Singapore may also offer you higher interest rates on future credit applications.
#1 Create A Budget
Right off the bat, you need to create a realistic budget tailored to your spending habits, monthly finances, and financial status. In doing so, you’ll find that you will always have the money to repay your personal loans as well as ensuring that you don’t end up accidentally spending the money meant to pay your loans on something else.
But, before you do, you need to understand the dynamics of your loan and how much you’re saving monthly. In fact, by tracking your daily spending, it’ll be easier for you to differentiate your wants from needs, and thereby, determine which things for you to stop spending on. By creating a division of essential and less important things to elucidate your spending habit, you’ll find it even more possible to refrain from spending your money on non-essential items.
If you’re worried that you might have a hard time keeping track of your expenses, there are budgeting apps available to track your expenses on your phone.
#2 Opt For Loan Restructuring
It’s common to think that choosing lower monthly installments (EMIs) with a longer repayment period is the best way to manage your cash flow. After all, it leaves you with more liquidity each month.
However, higher EMIs with a shorter loan tenure can actually save you more in the long run. The key lies in the interest rate charged. You’ll pay off your loan faster and reduce the total interest you owe.
If this sounds appealing, take a moment to assess your situation. Would you rather keep more cash on hand with lower EMIs, or save on interest by opting for higher EMIs and a shorter repayment period?
#3 Identify and Prioritise Your Repayment Loans
Now that you have a clearer idea of your spending habits and set a budget in mind, it’s time to prioritise your personal loans.
The first step is to identify the loan with the highest cost of borrowing and note down their repayment dates. In doing so, you’ll be able to monitor your repayment schedules and the amount without fearing that you’ll miss paying your dues.
It’s also prudent for you to allocate your funds primarily towards repaying loans with higher interest rates, whilst maintaining the regular payments of loans with lower interest rates. That way, you’ll minimise the total amount of interest that you’ll be required to pay and gradually eliminate higher interest amounts first.
#4 Consider Consolidating Your Loans
If you’ve several personal loans under your belt, then it’d be wise to consolidate your loans as having several loans will make your interest rates pile up and increase in the amount in the long run. By consolidating your loans, be it from banks or licensed money lenders, your repayment terms will be more streamlined, making it easier for you to repay your loans.
Additionally, you may also consider consolidating your loans into secured loans. A secured loan is a type of loan backed by collateral, such as a house or car. As the financial institution has this security, secured loans usually offer lower interest rates and higher borrowing limits.
#5 Make Lifestyle Changes
One of the simplest means to pay off your personal loans in Singapore is by making lifestyle changes. For instance, by cutting out unnecessary spending, you’ll have more room to increase your savings as well as funds meant for your personal loan repayments.
Getting into this habit might feel a bit challenging at first, but stick with it, and you’ll start to see real progress. Over time, you’ll steadily grow your savings while making consistent payments on your personal loans from banks or licensed money lenders — bringing you closer to financial freedom with every step.
In fact, you can start slow by shopping at places that can accommodate your budget, choosing a credit card provider with the best rebate plan, and cutting down on entertainment expenses. Assuming that you finally have more control over your finances, you may also be able to consider increasing your monthly repayment amount to help shorten your loan tenure.
It’s natural for borrowers to have the desire to repay their personal loans quickly, whilst improving or maintaining their commendable credit scores. The bottom line is this: the key to paying off your personal loan on time is discipline and proper financial management.
About the Author
Drawing on 3 years of proven knowledge and counting, LoanHere has grown to become one of the go-to platforms for consumers’ diverse loan needs. Besides ensuring borrowers get their loan quotes promptly from the best private loan providers in Singapore, we also make an effort to craft well-founded blog articles focusing on loans, finance, and lenders.
