In 2018, unsecured personal loans in the US were valued at over $138 billion.
That number was a record high for personal loans. And, as more and more people take out loans, more and more people need help learning how to pay off their personal loan debt.
If you’re struggling to pay off your personal loan, there are a number of things that can help you get back on track. All you have to know is how to plan, budget, and save money (plus a few other tricks that get you ahead faster).
Keep reading for 5 tips on creating a loan payment plan that gets you out of debt faster than you thought possible.
Develop a Plan
Developing a plan and putting it in writing can help you stay on track. Your plan should include the date you took the loan and when you need to pay it back, of course. But it also includes things like whether or not you’ll take on another job in that time, what you’re going to have to give up (i.e. canceling travel plans or holding off on taking a course), and a budget.
Create a Budget
Part of making a budget is figuring out how much you’re currently spending. Look over your old bank and credit card statements to see how much you spend on things like rent, cellphones, groceries, gas, and entertainment.
Include all of those items, with the exception of entertainment, as necessary items in your budget. You should also include a buffer for emergencies such as car repairs or hospital bills.
Once you have an idea of how much you spend, you can start thinking about how much you can save. Part of that is looking at your monthly expenses and deciding where you can cut back to save a little extra money.
Consider having a certain percentage of your paycheque removed automatically for direct deposit when you get paid. This makes it easier to save it because you won’t be tempted to spend what you don’t have. You should also put away any bonuses like tax credits or a work bonus.
Pay More Than the Minimum
If you’re only paying the minimum amount every month, then you’re not going to pay your loan off quickly. That’s because most of that payment is going toward the interest on your loan instead of toward paying back the principal. But not to worry, all lenders are happy to accept more than the minimum payment.
Consider Consolidating Your Personal Loan Debt
Consolidating your debt means taking out one single loan to pay off all of your other loans. It’s a great option if you’re paying back multiple loans at one time. That’s because one loan means one interest rate and only one payment to make every month – and it’s even better if you can find a loan at a lower interest rate than what you’re currently paying on your multiple loans.
More Help With Your Finances
Personal loan debt doesn’t have to be the burden you’ve made it out to be. With just a little know-how you can have your debt paid off faster and with less penalties.
Start by making a plan, devising a budget, and saving money. Then, you can think about debt consolidation and making more than the minimum payments to pay your loan off faster. And for more helpful guidance on your finances, be sure to check our blog regularly.