While one may be lucky to find a trusted money lender in Singapore who will be merciful enough to give a grace period in case of a delay in payments, it’s not something you can always do. Thus, it’s important to be on time when it comes to paying your loan obligations.
At the same time, for some borrowers, paying on time is easier said than done. Many times, it’s not that they can’t pay because they don’t have money, but because of simpler reasons that could’ve been prevented in the first place.
To make sure that doesn’t happen to you, check out these tips:
Borrowing Money Requires Discipline and Being Organized
Borrowing money can be a good solution to cash flow problems, especially during emergencies. With the current economic situation and the frequency of financial upheavals, it would be difficult to get by without borrowing money at least once in your lifetime. While it is best to maintain an emergency fund and save up for your dream house or dream car, borrowing money is unavoidable.
The best way to go about this reality is to develop the skills and systems to eliminate any possibility of defaulting from paying your loans. Even before you apply for one, you should do a thorough and honest evaluation of why you are borrowing money. Is it just for concert tickets or airplane tickets to an exotic destination? Are you ready to be in debt for years in exchange for days of vacation where you will also find yourself worrying about how you will be able to pay for it all? It’s up to you.
Once you have decided that a loan is inevitable, come up with a repayment plan. Make it as detailed as possible. Think outside of the box. Do you need to get another job to pay your loans in a shorter period? Do you need another income stream so you can get back to good financial health? It is crucial to have a plan. Otherwise, you will get overwhelmed with the added responsibility and be paralyzed by the consequences of not being able to pay on time.
Lastly, you should have a contingency plan on how you can comply with your loan payments even if you lose your job or you get sick and hospitalized. By coming up with a Plan B while the conditions are good, you will have something to rely on when things go bad.
Avoid Compications, Make Sure to Pay On Time
Lenders are strict with loan payment schedules. Failure to pay on time might incur huge penalties and fines. Sometimes, a lender can even choose to call out your default and demand full payment of the loan. Here are basic steps in making sure you do not default on your loan payment:
1. Set Reminders
Due to the recurring nature of loan amortizations, you should be able to plot when you need to pay. Use calendar alerts or apps to remind you of upcoming payments. These are readily available on your phone. Use one from your phone so you will be automatically and constantly reminded.
A pro tip: set the alarm to a few days in advance to account for unexpected things happening. Imagine how cumbersome it would be to default on your payment because you got sick on the due date and cannot deposit the cash.
2. Create a Budget
Plan your finances to ensure you allocate funds for loan payments. Some people create a sinking fund for their loans. A hefty loan payment can make a big dent in your monthly budget. By putting in small amounts in a fund for your payment for the month, it will be less painful. It will also teach you how to save and plan. These are invaluable skills if you want to be in better financial health.
3. Set Up Automatic Payments
Enable auto-debit to ensure timely withdrawals from your account. This will minimize the possibility of human error affecting your compliance with your obligations. If you have an automatic payment account, once your account receives money, it will automatically pay off the loan.
This is the usual set-up if you borrow from a bank. They often require you to set up a separate account that will be automatically debited regularly for the payment of your loan. This will take the load off your mind and ease your anxieties. You no longer need to be afraid of missing a deadline since the funds will be automatically transferred to your lender.
4. Emergency Fund
Maintain a buffer for unexpected expenses to prevent late payments. There’s nothing worse than a huge bill that will ruin your budget for a month and set you back in debt. Aside from the feeling of helplessness, it will also make you susceptible to making bad decisions due to desperation. Do not let this happen to you.
Treat this as a form of self-care. You are setting aside funds to help your future self who might be in a bad financial situation. Plan ahead so you can help yourself.
5. Monitor Statements
Regularly check your loan statements for accuracy and payment deadlines. Change your mindset from thinking of this as a tedious chore to seeing it as an exciting activity that will show you your progress in terms of loan payments.
It will keep you motivated and aware of how much you still need to pay. You will also be able to easily spot any errors or discrepancies before they become irreparable.
Conclusion
If you fail to pay loans on time, you will default on your loan obligation and ruin your credit score. This would affect your future finances in ways that would have been avoidable. Thankfully, by following these tips, you can avoid that from happening.