What to do if personal loan payments aren’t fitting in your budget
Staying on track with loan payments allows you to pay off your debt within your loan term, avoid additional interest charges and maintain a good credit score. But, we understand your situation may have changed since getting your loan.
Our Lending Specialists share their best advice for what you should do if your loan payments aren’t fitting in your budget:
1. Choose loan insurance
You never know when the unexpected will occur, and an unexpected reduction in income can make it difficult to stay on track with loan payments. By choosing loan insurance you can cover some or all of your payments in the event of unexpected job loss or an injury that prevents you from working.
Unfortunately, you can’t add insurance to your loan if you’ve previously declined it. But, you may be able to add it to a new loan (ask your Fairstone Lending Specialist for more details). Otherwise, keep reading for more tips that can help make your payments more budget friendly.
2. Choose a longer loan term
You can reduce the amount of your loan payments by choosing a longer loan term. You may pay a bit more in interest charges over the course of your loan. But, remember that missing payments can increase your interest charges as well. It’s better to pick a longer loan term with a payment amount you know you can manage. Again, once your loan details are finalized you typically cannot change the length of your loan term so this is a more proactive strategy. But, if you’re concerned about the length of your loan term, it’s always a good idea to talk to your Lending Specialist to see what your options are.
3. Change your payment frequency
Did you know semi-monthly and monthly payments lend themselves to a more affordable payment? That’s because when you make payments biweekly, you’re actually making two extra payments a year compared to semi-monthly payments. While this is a great way to reduce interest charges and pay off your loan faster, it can make your budget a bit tight on the months when three payments come out of your account. Ask your Lending Specialist about your payment options to see if this is the right solution for you.
5. Set up automated loan payments
Tempted to spend your paycheque before making all your bill payments? If this sounds like you, you’ll likely benefit from setting up automated payments. You can set up your payments to come out on a day that’s convenient for you (like your payday). You’ll never have to worry about forgetting or missing a payment, and you won’t get a chance to spend your money before it gets transferred towards your loan payment. It’s a win-win!
Don’t worry – you’ll adjust to the lower balance in your bank account on pay day before you know it.
Tip: Try and spread your bill payments throughout the month, so you don’t have everything coming out of your account on the same day.
6. Are you a homeowner? Choose a secured loan.
A secured loan is backed by the value of your home allowing you to access a lower interest rate. And a lower interest rate means you may be able to secure a lower loan payment. Already a current customer with an unsecured loan? Contact your local Fairstone branch to find out if you’re eligible to convert your loan in to a secured loan.
7. Stay in contact with your branch
It might be daunting to let us know that you can’t make a payment on time, but we understand unexpected situations happen to everyone. If you have an emergency or unexpected expense that prevents you from making your payment on time, let us know so that we can help find a solution to get you back on track with your loan. The sooner you get in touch, the better, since you’ll avoid racking up interest charges which will put you behind on your payment schedule.
8. Increase your income
Not open to changing your payment frequency or loan term? Try increasing your income to make more room in your budget. Ask for a raise, get a part-time job or rent out a spare bedroom. Check out these 10 ideas to earn more money to help you pay down your loan faster.
9. Consolidate your debt
Are other bill payments getting in the way? You may be able to take out a new loan and consolidate all your debt into one single monthly payment. A debt consolidation loan offers a manageable payment schedule and it could even save you hundreds to thousands of dollars in interest.
The perfect recipe for making sure your loan payments fit in your budget? A few good money-management habits, choosing the right loan options and some help from your Lending Specialist, of course! It might take a few tries to strike the right balance, but we’ll work with you along the way to make sure you’re happy with your payment schedule.
Interested in a loan? Try our free loan quote! In just a few minutes, we’ll tell you how much money you could qualify for and what your payments might be. No obligation and no impact to your credit score.