Every loan you take must be repaid. Don’t doubt it. Anyone who wants to avoid this process can count on the fact that his action will end at the execution. Therefore, do not try to cheat and pay regularly and on time. Some lenders may even appreciate it and offer you benefits such as:
- Forgiveness of installments
- Interest reduction
- Interest refund
In order to be able to repay the loans as agreed, it is first necessary to ensure that the amount of the repayment is optimal. Many people often do not know how to set payments to suit your budget.
Beware of microloans
These are today a great attraction especially for people in financial need. So for those applicants who need a few thousand crowns quickly. They can offer them so-called payday loans. Beware, however, that this is a specific credit product that does not have a monthly breakdown. The amount borrowed must be returned as a lump sum, in weeks, up to one month. Here it is quite clear that the amount borrowed should reflect that you, plus any interest, can return it within the required deadline. In practice, the amount borrowed should never exceed the amount you have left after you have paid all the mandatory payments and also the food. Otherwise you will be in a situation where it is necessary to request an extension of the deadline, which is associated with a fee. And at this point the debt spiral starts to spin.
Be clear about how much money you earn and how much you spend
Before you start setting up your installments, you need to be clear about how much you earn and how much you spend exactly monthly. Before you apply for the loan, take the paper and pencil and calculate everything. It’s ideal to adjust your budget according to the familiar 50-20-30 rule. This clearly states that when you have a certain income, you need to break it down so that:
- Fifty percent were regular and necessary expenses
- The reserve fund was twenty percent
- Thirty percent were for personal use
If you manage to keep your budget under this rule, this is good news for you to set your installment amount. You have a place to take, because you regularly have as much as 20 percent left, so you can significantly cut even a thirty percent share – just reduce the leisure activities.
Repay the loan as quickly as possible
The basic rule in the world of lending is that you pay off the loan as quickly as possible. Why is this so? Keep in mind that interest is calculated on an essentially daily basis, based on the outstanding amount. The higher the amount is, the more you will overpay in real money. There is a difference whether after six months of repayment the principal will be halved or only ten percent lower. Especially in the case of high loans, it is quite obvious each month.
Beware of too high installments
There is therefore a possibility of choosing a shorter maturity period, which will be associated with getting rid of the obligation really quickly. We do not need to remind you that you should find a given amount of funds in installments in your budget. This is one of the very foundations of financial literacy that is so popular today.
Rather, we should add that the amount of the monthly payment should not be entirely on the edge. Anything can happen and suddenly you are in delay, because you have nothing to take. Although the highest repayment procedure will ensure a low overpayment and a quick elimination of the obligation, it is not good to take risks in the context of numerous problems. It is therefore better to choose a repayment that is high but not on the edge. That leaves you a hundred or a thousand crowns as a reserve in your budget.
Too low installments are bad
When choosing the correct installments, taking into account the above procedure, be careful not to slip on the installments too low. This is because they will not significantly disrupt your monthly budget and you will not have to worry about unexpected situations, but they have one clear negative. And such that it is necessary to count on more overpayment, despite the fact that the length of your commitment will be significantly extended. This is also good to respect.
Extraordinary installments should be used at all times
When we look at classic consumer loans, it becomes standard that extraordinary repayments are commonplace. This means that they are not penalized in any way. This is a paying plus for you. Primarily you choose a repayment schedule, where the amount of the repayment will suit your budget, from which you will have something left for unexpected situations. However, do not spend this amount. After a few months, you can make it to the standard installment. You will be paid in the same way as in the case of the highest possible installments. At the same time, you will be sure of more peace.
Speaking of the mortgage, it is necessary to know that the terms of the extraordinary installments are slightly different. Only a maximum of 25 percent of the loan can be paid annually without penalty. While this may seem restrictive, it still means that a mortgage can be repaid within four years without fees.
Do not pay longer than the goods serve you
If you still don’t know how to set up repayments, consider what you are buying for the money you borrow and how long it will serve you. The right thing is to pay off the thing and then it still served you. If this does not work out economically in terms of the repayment amount and your budget, it is better to think about whether you really need the thing and whether the loan is the right choice. An example is an old car, with a lifetime of a few years, but with a view of repayment that will attack the 10-year limit.