There are a number of different things you can do before you apply to make sure you’re able to access the most affordable loans. Improving your credit rating (more info on this here) and reducing the borrowing amount can all help. However, you might be surprised to know that there are also a few relatively simple steps you take once the loan has been agreed and you’ve received the money to reduce the amount you have to repay.
In this guide, we’re going to explore some of your potential options to make the repayments on your unsecured personal loan more affordable.
” How Can You Make Your Loan Repayments More Affordable “
Use savings to repay the loan
If you’ve received money as a gift or benefitted from an inheritance after taking out a loan, it almost allows makes good financial sense to repay the outstanding amount as quickly as you can. Your first job is to make sure the early repayment charges aren’t too high. If not, doing a few simple calculations will reveal how much you could save. If you’re going to repay a loan with your savings, make sure you always pay off the most expensive debt first.
Switch to a loan with lower interest rates
If you don’t have savings you can use to repay a loan, you could reduce your repayments by replacing the loan with a lower interest deal. For whatever reason, whether it’s due to falling interest rates or an improvement in your credit score, you may find that you’re able to access a loan with lower interest rates than you’re currently on. If that’s the case, you might be able to pay off your existing loan in full and more cost-effectively by applying for a cheaper loan. However, you should always factor in any arrangement fees for the new loan and early repayment charges on the old loan first.
Consolidate your debts
Some loans are specifically advertised as debt consolidation loans. They are products that allow you to merge your existing loans into one. This type of loan should be approached cautiously and only after you’ve considered all your other available options as they’re typically secured against your property. That meansyour home loan could be at risk if you’re unable to make the repayments.
Although the lower interest rates debt consolidation loans typically offer can be attractive, over the longer term, they can turn out to be more expensive than your existing debts, so you should always calculate the total cost of the loan and the repayments very carefully.
Pay off loans with credit cards
If a debt consolidation loan doesn’t make good financial sense for you, a low-interest balance transfer credit card could make your loan repayments more affordable. This type of product will transfer money directly into your bank account that you can then use to repay overdrafts and loans. There is a fee attached to this service which you must factor into your calculations. You should also make sure you’re able to pay off the credit card before the zero or low-interest rate runs out.
How have you successfully reduced your loan repayments? Please share your thoughts with our readers in the comments below.