If you’re like most adults, you may have a personal loan with a relatively high amount. Whether that’s credit card debt, a car loan or mortgage loan, the debt from that loan will affect your life in many ways. And debt also means that you are in need of a huge sum of money to pay back on time. Let’s learn how to repay your loan timely in the following article:
What happens if you don’t pay your loan on time?
Everyone with a loan will manage to pay it back on the due date. However, some forget to make a payment, or even worse: don’t have enough money for paying. Under any reason, in case you just fail to pay, you will be in default.
Loan defaulting means you have missed a payment, or you have failed to repay the full amount required each month for three to six months. If this is the first time you pay late, you will receive an announcement form from your lender warning that you need to make up for the missed payment.
If you repeatedly default on a repayment, your loan provider can do one of these things:
- Pass your debt to a collection agency
- Take court action
- In case of a secured loan, the property tied to the debt could be taken away
At first, they will likely send you some reminders about the payment, but if you keep on missing payment deadlines, and you are falling behind financially for thre3 to 6 months, they may decide to make a further move.
On top of this, every missed payment will appear on your credit report, which will altogether lessen your chances of being approved for credit cards and loans later on.
You are now in debt, owing even more interest than previously. The less you pay back, the more your obligation will aggregate. There may likewise be an expense for missing a payment, so it’s ideal to try not to miss any credit repayments in any case.
Some tips to deal with your loan
Did you know there are simple tips you can utilize to reduce the pressure? With a carefully applied method, you can pay off your loan or credit card debt and any debt of yours sooner than you expected. These tips can have a big effect to the total interest you’ll pay over the existence of the loan and get you debt-free quicker:
1.. Tell the lender you want to pay the loan off early
Keep in touch with the lender and request to know the total amount you should cover to clear the loan, this is called an ‘early settlement figure’. The lender should reveal the sum you need to pay in full. How much interest you have to pay relies upon the amount you’ve paid already.
You will then have about 1 month from when they accepted your request to pay the amount off in full. Since you requested an early payment doesn’t mean you have to go through with it. You can decide to continue with your usual payments, all things considered.
2. If you just need to pay back a part of the loan, the savings of interest and charges will not be exactly balanced with that of paying off the loan in full.
- tell the moneylender in writing form that you mean to pay off a part of the loan.
- ask how much your payment will lessen the total loan amount and future payments – you could possibly pay a similar sum every month over a shorter period instead.
- make the payment within 1 month.
3. Penalties for early repayment
Repaying the loan earlier is when you clear your debt before you are lawfully obliged to. Many banks and money lenders charge fees for early repayments, which is roughly equivalent to 1-2 months’ interest. You could find an online interest calculator to know how much you must pay in this case. In case you need to repay a loan ahead of schedule, you should contact your moneylender and ask them for an “early settlement amount” for your loan.
Make payment for your loan: Step by step
With regards to paying back your personal loan, there are a couple of simple ways you might opt to pay it off sooner, which thus can lessen the sum you repay overall.
If you have an individual loan with a variable interest rate, you are probably going to have somewhat more flexibility when it comes to paying the total debt. But you can speed things up for your loan with a fixed interest rate too.
Step 1: Keep a top priority of the loan duration in mind:
Assuming the loan taken is for a year, you need to repay the loan within that time. With this loan term, you will pay your loan on time and no penalty is charged to you.
Step 2: Know the exact interest to be paid:
Along with monthly installments (EMI) we need to pay interest of a specific percentage. Through this, our payments do not gush out over the following months.
Step 3: Calculate EMI and pay on schedule:
Prior to taking the loan, we must have determined EMI that is to be paid back to the moneylender. Once we have taken a loan we need to ensure that we have kept or repaid EMIs and interest within the chosen time.
Step 4: Opt for any alternative:
Banks provide different alternatives through which we can repay our loans. Some of them are programmed to cut from the savings account, online payment or some more. You would now be able to repay your loan from your smartphone.
Step 5: Enjoy your loan free life:
Once the loan is repaid without hardly lifting a finger by following the above steps, there is no reason to worry about anything else.
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