It might be hard to look away when a new tech gadget hits the market, or when that pair of designer shoes you’ve always wanted goes on sale. These situations could make it more difficult to stick to your budget, especially when enticing payment choices are readily available. How can we keep our finances safe in situations like these?
When preparing a budget, first consider and list all essential expenses such as utilities, groceries, and insurance. Next, list any personal loans you have taken out. If the total of these expenses exceeds your income, adjust your spending habits to focus on essentials first, leaving out less important items. Any money left over after these adjustments can be put towards savings, additional investments, or occasional treats and indulgences for yourself.
2. Consider other financing options
If another lender provides a lower interest rate, it is okay to consider refinancing your loan. This allows you to save more money while also giving you more time to prepare for your next due date. Regardless of the lender you choose, always be meticulous and on the lookout for hidden charges, even if the entire arrangement appears to be in your favour. Inquire about the terms and figure out how much money you'll save with the new monthly plan. If paying off your debt with the new loan will take longer, and prepayment penalties would be incurred, you should probably adhere to your original payment plan.
3. Stick to your payment due
Whether you or your lender sets your payment due date, it's critical not to miss any payments in order to avoid penalties and interest costs. You're already working with a limited budget, so you don't want to give yourself any new problems!
How can you minimize the chance of missing any payments? Make it easier to remember your deadlines by making an Excel spreadsheet, setting a monthly alert on your phone, or even creating a calendar event.
4. Automate payments
Thanks to technological improvements in banking, people can send money or pay bills without having to stand in line at a bank. Through your bank app or mobile wallet, you can easily arrange automatic payments straight from your account. Using automatic payments is convenient, forces you to stick to your budget, and reduces the possibility of missing payments.
5. Watch out for advance payment penalties
Because you want to pay off your debt as quickly as possible, you stayed within your budget and saved enough .
This is awesome – it speaks well about your discipline and money management skills. However, be wary of doing too much of a good thing. It is important to note that some lenders charge prepayment penalties. These penalties are designed to recoup the interest that a lender would lose if the borrower paid off their loan early. Before making any advance payments, make sure you've read and understood all the terms of your loan agreement.