- 03 Mar 2021
- 4 minutes
Taking a personal loan is pretty easy and simple from the application stage to the processing stage up to getting the loan money once you have a good credit score. People need finance for so many reasons. One of which is car finance. Everyone has various needs and can’t seem to find ways to meet these needs, hence the need to get finance from elsewhere.
What are Personal Loans?
Personal loans are loans that are taken by people to help them out of financial crises. There are also some personal loans online.
These loans are easier to get as they are an alternative to bank loans. Getting this credit loan is easy as most online lenders deal with fast loan disbursements.
However, where the hard work might begin is in the repayment of the loan, especially at this period when the world seems to be in a financial crisis due to the COVID-19 pandemic outbreak.
Already with the situation at hand, it is hard to come by; making ends meet and also trying to meet up with loan repayments. So, having a hard time repaying your loans is expected but unacceptable.
This is where managing your loan repayment properly can make the repayment process a walk in the park for you even with their interest rate.
Personal Loan Interest Rate
This rate will be charged against the principal loan amount and the borrower will repay the sum of principal and personal loan interest rate. The applicable interest rate is what you should be aware of when looking for loans. There are two types of personal loan interest rates.
A fixed-rate of interest: This loan interest rate remains unchanged throughout the tenure of the loan.
Floating rate of interest: Floating rate of interest can either be increased or decreased during the loan tenure as it is prone to change periodically.
Personal Loan Calculator
A personal loan calculator can be used to calculate personal interest rates and it can be calculated in two ways which are:
Flat rate: this mode of loan calculation is the calculation of the entire loan with the tenure to get the interest rate.
Reducing balance method: this method calculates the loan interest with the remaining balance of the loan. This means that the interest reduces as the loan reduces.
Not finding a sure way to manage your loan could jeopardize your credit score and you wouldn’t want to borrow to offset your loan on time as it would only get you sunk in debt more.
Stay put as we bring you our strategic personal loan management tips to help improve your standard of living
Creating a budget
When you take out a personal loan online, one of the first things to do is to ensure that you have a budget created. Creating a budget will have you plan out your loan effectively in use and repayment, so, this is as important as filling out the application form for your loan.
Direct Debit is one loan management tip that comes in handy. This means that the stipulated amount is set to automatically leave your bank account on a particular day.
Setting up a direct debit on your loans makes repayment easy and painless. This way, there’s no forgetting to repay the loan at the end of the month. Who knows, your lender may just be so happy with you that they’d give you discounts.
You may not want to agree with this tip until you hear how beneficial it can be for you. Now, paying more of the stipulated loan amount can be done when you have surplus cash.
This is advisable as it will help reduce your loan tenure as well as the interest rate on the loan. Find out more about Skyline Direct reviews as they offer a weekly payment plan.
Refinancing your loans means exchanging your present loan for a more favorable one. Although for this to happen, the borrower has to take a new loan to replace the old one and then update the agreement of the old one with the new one.
However, before you go ahead to refinance your loan, try to do some basic personal loan calculations to see how much interest you can save on the new loan.
Prepayments are similar to paying more of your loans monthly only that the difference is you pay ahead of the month.
Prepayments of loans, just like paying more monthly can help you beat down on your interest rates however, before you go ahead with this, ensure that there are no penalties for prepayments on the loan.
Consolidation of loans
Consolidation of loans means placing all your loans together under one. First, this can be done if you have more than one loan you’re repaying.
Moreover, it would only be favorable to you if you get a lower interest rate than the combined rates together.
Avoid opening more credit accounts
With the new offers of “buy now pay later” that is everywhere, it might be difficult to resist the urge of opening more credit accounts.
No matter how tempting and juicy the offer is, refuse it! While you’re trying to manage a personal loan, it would be rather unwise to add more loans to it.
If you desire a good life free of hassles and wouldn't want the burden of repayment of a loan to deplete your standard of living, you are encouraged to deploy these personal loan management tips and you would find them helpful.