If you find yourself strapped for cash and money is tight, making your loan payments can be a challenge. But there are ways you can ensure that payments are made with a few insights and adjustments to your spending.
Why It’s Important to Make Loan Payments
With many lenders the payments you make are reported to the credit bureaus. Being late on payments can damage your credit score. Since it takes so long to increase your score, you should do everything you can to protect it.
You might also consider that when (not if) you need a loan in the future, if you’ve damaged your credit score it can make it more difficult to get approved, and you might find yourself paying higher interest rates as well.
Track Your Spending
When every dollar counts, you need to know how it’s being spent and where it goes. Taking the time to review your budget can provide a clear understanding, and sometimes reveal opportunities where you could cut back or even pause spending. Look at the subscriptions you have, are there any not really being used? Have any bills recently increased? Contact your provider to see if there is anything they can do. Maybe it’s time to switch providers. Look for nonessential items that you’ve spent on and try to skip these types of purchases in the foreseeable future until your finances are under control.
RELATED: Building a Budget That Works
Prioritize Your Payments by Interest Rates
When you’re trying to balance your finances, you should try to pay down the debt with the highest interest rates first. The debt with the highest interest rates tends to cost you more. But also look at the term. Sometimes it can be deceiving, but loan with a short term but higher interest rate might be comparable to a loan with lower rates but longer terms. You should also try to pay off credit card debt as soon as possible and always avoid just making the minimum payments.
Prioritize Your Payments by Purpose
You’ll also want to consider that being late on a bill can be cause to have a service shut off or possibly other issues. Most will prioritize their rent or mortgage, since you need a place to live, and the remainder of their income is for other bills and expenses. Organizing your payments by priority and purpose will provide you with some direction when money is tight and you’re trying to determine what needs to be paid, keep the lights on, and a roof over your head.
Making Loan Payments
If you’ve organized your personal finances and still find it difficult to make your loan payments, you should contact your lender as soon as possible. Discuss your options with them and you might find they are willing to work with you. Missing any payments that can affect your credit score can impact you later in life and will often be a priority for keeping your personal finances in order. Often a lender is willing to work with you when it comes to making your payments since its better than if you were to default, file for a consumer proposal or claim bankruptcy. Some lenders will allow loan deferment, or to postpone payments for a set length of time. This delay of repayment can sometimes be what you need to get back on track. Note that interest is usually still accumulated even though the repayment date has changed.
Personal Finance Management
If you find that you’re living paycheque to paycheque and that your expenses exceed your income, you probably need to take a hard look at your budgeting, or even consult with a financial advisor about your personal finances.
If you are not able to get your finances under control within a reasonable amount of time, you might want to consider consulting a financial advisor. Using short term loans frequently to get by can be signs of more serious financial issues that can also require speaking with an advisor.
Helpful Articles When Money is Tight:
- Ways to Lower Your Bills and Save Money
- How to Get Started with Money Management
- Dealing with Debt and Financial Stress
- How Personal Loans Can Help Pay Off Debt Faster