LOAN REPAYMENTS: HOW TO MANAGE YOUR LOAN
- WHAT HAPPENS IF I DON'T MAKE REPAYMENTS ON TIME?
- CREATE A LOAN REPAYMENT SCHEDULE
- WHAT IF I CAN'T MAKE A REPAYMENT IT IS DUE?
- LOAN REPAYMENT HOLIDAYS
- CAN I NEGOTIATE WITH MY LENDER?
- MULTIPLE LOANS? WHICH ONES TO PRIORITISE
- CAN I PAY MY LOAN OFF EARLY?
- WHAT HAPPENS IF I CAN'T PAY MY LOAN?
WHAT HAPPENS IF I DON’T MAKE REPAYMENTS ON TIME?
If you miss a repayment, it will have a negative impact on your credit score and hence, your future borrowing. Lenders will not lend to you if they’re not 100% sure you’ll make your payments on time.
Also, missing repayment doesn’t mean you’re off the hook; you’ll still have to pay the outstanding balance and maybe even extra fees or interest. By staying organised and keeping on top of your repayments, you will save money, particularly if you make repayments early.
CREATE A LOAN REPAYMENT SCHEDULE
When agreeing to your loan, you would’ve been told what days you are expected to pay, be it the last or first day of the month, once a week or every fortnight. Some lenders let you choose what date you can make a payment so make sure you choose a day that works best for you, like straight after payday.
Stay on track by setting alarms on your phone or writing in your diary or wall calendar for when repayment date is coming up so you can make sure you’ve got the funds in your bank ready. If your loan is at a fixed monthly amount, you can set up a standing order. If your repayment amount could change, make sure you set up a direct debit so your lender receives the full payment.
Create a loan repayment schedule so you know exactly how much you’ve paid off and the outstanding balance you have left to pay. Something a bit like below can take less than 10 minutes to put together and can really help you stay in control of your loan.
Example only - loan of £400 over 3 months with 201% representative APR and an annual interest rate (fixed) of 79.28%.Total amouont payable £479.28.
This way, you have a clear idea of what you’ve paid, when your next payment is coming up and the balance left to pay. Keep this pinned up in your home so you always have visibility of it.
WHAT IF I CAN'T MAKE A REPAYMENT IT IS DUE?
When you were applying for a loan, your affordability would’ve been assessed by your provider to make sure you can afford the payments each month. So (in theory) you should be able to make repayments on time and in full every month.
But unfortunately, life just isn’t that easy. Emergencies like car breakdowns, sick leave from work or household repairs can suck up more money than you realise, meaning you could struggle to make your repayments.
Although it may feel like it, this isn’t the end of the world. Take a step back and assess your situation. Don’t stay in the dark and let the lender know your situation, as they may be able to help.
Depending on the emergency, you should try and make your repayment a priority but this can’t always happen. If you’re lucky enough to have a good support system around you your family or friends may be able to help.
If this isn’t an option, it is possible to get a short break from paying your loan, called a repayment holiday, so you can gather your bearings and get yourself sorted.
LOAN REPAYMENT HOLIDAYS
Get in touch with your lender as soon as you can, it is better to iron out issues in advance instead of facing a last-minute panic. Most lenders will let you have a loan repayment holiday providing:
- You have already made at least one repayment since taking out your loan
- You've got a direct debit in place
- Your repayments so far have all been on time
- You are not currently making a loan protection insurance claim
- There are at least 30 days left on your loan term
Beware this may vary from lender to lender, as they all have different criteria for loan repayment holiday. If you are unable to receive a holiday, you might be able to negotiate on the late payment fees or rearrange your repayment date.
CAN I NEGOTIATE WITH MY LENDER?
The real answer: it depends. If you’re in need of help, the lender may be flexible but speaking to them is he first port of call.
It’s best to give them a call on the phone. Try to be friendly and polite, even if you’re under a lot of pressure or stress. Remember that the company doesn’t have to help you out, but you’re more likely to get help if you’re nice to them!
Alternatively, there are debt management and help charities that can offer a helping hand:
- Money Advice Service - 0800 138 7777
- Stepchange - 0800 138 1111
- Debt Advice Foundation - 0800 043 40 50
- National Debtline - 0808 808 4000
- Payplan - 0800 280 2816
- Christians against poverty - 0800 328 0006
- Debt support trust - 0800 085 0226
- Business Debtline - 0800 197 6026
- Citizens Advice Adviceline - 0300 330 1313
MULTIPLE LOANS? WHICH ONES TO PRIORITISE
Our budget planner will give you a good idea of how much you’re spending on credit in total. Prioritise your debts to make sure you don’t fall behind on important credit or bills, such as your mortgage repayments, rent and utility bills. Don’t lose your quality of life for debts.
If you have two loans or cards but you can only afford to pay back one of them, compare the fees and interest charged for a late or missed payment against each other. Consider paying back the more expensive one and asking the other lender for a payment holiday.
Choosing between loan repayments is a very difficult and overwhelming position to be in. If you don’t feel confident or it’s too much to handle by yourself, get in touch with a debt management charity, like the Money Advice Service. Often, they can work through your expenses with you, prioritise your debts and even contact your lenders on your behalf.
CAN I PAY MY LOAN OFF EARLY?
Most lenders will allow customers to pay their loan off early including making larger repayments each month or putting large deposits against your total loan amount. However, some providers charge fees as they are losing out on interest and can typically charge anywhere between one to two month’s interest or a set penalty amount.
If you are considering paying your loan off early, have a look at how much money you would end up saving after paying the fee. Generally, you will save more the earlier into your loan you are but this could incur larger early redemption charges.
WHAT HAPPENS IF I CAN'T PAY MY LOAN?
If you’ve struggled just this month but you’re back on track, take the right steps to keep on track for the rest of your loan search. If you think this issue could persist throughout your loan term, try contacting your lender and ask what solutions they offer to people struggling with their repayments. This could include extending your loan term which will decrease your monthly repayments or offering you a repayment holiday whilst you get back on your feet.