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So, you’ve successfully applied for a loan, and you’ve received your funds. Apart from spending the cash on the holiday of your dreams, wedding or whatever you’ve set your heart on, all that’s left to do is repay the loan.
Your credit rating is the single most important contributing factor to your ability to obtain credit at an affordable rate. That is why careful management of your personal loan is absolutely essential. Sound financial management may also allow you to repay your loan early, thus saving you an enormous amount on interest payments. By making sure you stay on top of administration and repayments, you will be able to sleep soundly in your bed at night.
Keep your personal details updated
Whether you move home, change your name or change jobs, it is essential that you keep your lender informed. Should you need to be contacted, your personal data will be used, and it must be current and accurate if you’re going to keep up to date with the status of your loan. The big lenders and banks will allow you to update your personal information online, but some institutions will require the changes to be made in writing or over the phone.
Keep a close eye on your monthly income
The last thing you want is to struggle with repayments, or miss them altogether. If you’re self-employed, it may be worth starting a contingency fund – which can be used to tide you over when your income drops. If your income is based on commissions and bonuses, you should put away cash during profitable periods. Try to plan for your next repayment two weeks in advance, so there won’t be any nasty surprises when direct debit day finally arrives. And if your income is cut for any reason (perhaps because of redundancy), you should call your lender immediately. And if you need to change your direct debit date for any reason, your lender may agree if it makes life easier for you.
Always check your bank statements
Particularly if you are making repayments by direct debit, you should check your bank statements regularly, just in case a clerical or computer error has resulted in a missed payment. You may not realise you’re actually behind on your repayments until your credit record has already been affected by the tardiness of your last payment. If you bank online, you can check the money has left your account on the agreed direct debit date almost immediately.
Look for opportunities to repay early
While you could be hit with a significant early repayment penalty, you could still save yourself hundreds of pounds by settling your loan early and some lenders do not charge a fee to do so. Your lender is duty bound to provide you with an early settlement figure when you ask for it, and you have the legal right to repay your loan in its entirety whenever you wish. It’s probably a good idea to reassess your financial position at least every six months, as you could be missing a fantastic opportunity to save money.
Ask for help early if you experience financial difficulties
No reputable lender wants its customers to struggle with personal loan repayment. It is in your lender’s best interests to be as accommodating as possible when it comes to financial difficulties. As soon as you believe you might struggle to make a repayment, get in touch with the customer services department, and explain your situation. They may agree to give you a few extra days to catch up, or you might be able to agree a payment holiday if you’ve suddenly lost your job. If cover isn’t provided through your employment, it may be a good idea to arrange an insurance policy for your loan, which will cover your repayments if you fall ill or lose your job.
Personal loans can help you to realise your dreams – when your dreams simply won’t wait. Manage them properly, and you’ll cultivate a credit record that actually makes borrowing cheaper.
About the Author
Nick Harding is Founder and Chief Executive Officer at Lending Works. Lending works is a peer-to-peer lender that matches thoroughly underwritten personal loan borrowers to shrewd lenders so both receive a much better deal. Lending Works is the first peer-to-peer lending company to have insurance that protects lenders against borrower defaults and fraud. For more information, please visit – www.lendingworks.co.uk or follow Nick Harding on Google+
