You did a great job finding the right lender for that installment loan. The process even involved using a personal loan calculator to ensure that the monthly payments would fit ito the budget without any great difficulty. Now that the loan is processed and you have the money in hand, how will you go about managing the loan responsibly? Here are some tips that will help.
Make the Loan A Priority Budget Item
There are certain line items in any home budget that take priority over the others. Food, clothing and shelter are examples. Things like funds for eating out and entertainment are not usually considered priorities. If you want to manage an installment loan responsibly, considering it a priority is essential.
What does that mean? It means that along with paying the mortgage or rent, buying food for the fridge, and paying your utility bills, the installment payment takes precedence over going out Friday night, grabbing fast food on the way home from work, or replacing your aging television. If there’s money left over after you cover all of the necessities for the month – including your loan payment – then it’s fine to treat yourself.
Allow Extra Time For The Payments to Post
Not all lenders post and apply payments in the same manner. Some immediately apply a payment to your loan balance. Others will note the date that the payment was received, but it may be several more business days before it actually applies to the balance. To be on the safe side, it never hurts to submit your payment a week or even two weeks before the due date. Even if there is a short delay between receiving the payment and applying it to the balance, you won’t have to worry about not meeting the due date.
Consider Rounding Up Each Installment Payment
Did you know that some lenders will allow you to round up your installment payments? Rounding up to the next dollar can have more of an impact on the balance than most people realize. If you decide to slip another ten dollars in along with rounding up, your balance could be a lot lower by the end of the first year. Keep this up and you could pay off the entire balance a few months in advance.
Make Extra Payments When Possible
Another approach is to make an extra payment now and then. Setting a goal of making an extra payment every quarter is not unreasonable. You’ll be surprised at how it helps reduce the balance over the course of a year. Assuming that the lender does not impose penalties for early loan settlements, you could end up saving on the total interest paid.
Use The Online Interface To Monitor Your Account Status
Many lenders today provide an online interface that client can access and monitor their loan accounts. This is helpful since you get to see exactly when a payment is applied to your balance and how much is still owed. Some lenders even use this approach to help clients track how much interest they’ve paid so far, and how much of their payments have gone to the reduce the principal balance.
Seeing your balance go down from month to month is a powerful motivator to keep going. Along with monitoring the loan balance, the lender may also include features that help you with finances in general or possibly provide you with food for thought about how to structure future loans.
Managing your installment loan responsibly goes a long way toward establishing a positive record with the lender. It also helps to improve your credit scores. Those two benefits combined will make it all the easier for you to borrow money the next time a need arises. In fact, it could allow you to enjoy more competitive terms and conditions when the time for another loan comes along.