Your personal loan in Singapore was approved – congratulations! Now comes the hard part – sticking to the repayment schedule. There are two reasons why it is important to service your loan as scheduled.
Firstly, there are monetary penalties each time you are late on a payment. This includes:
- A one-off late payment penalty every time you fail to pay the monthly instalment by the set date. This fee is capped at $60 per month.
- Interest on the amount due. This is calculated at 4% of the amount due for that month (not the outstanding loan balance)
Secondly, the cumulative debt that you incur as a result of these penalties makes it more likely that you will default on future payments. Remember, a failure to meet your financial obligations today can have catastrophic effects on your credit rating for years to come.
Use these 4 simple tricks to stick to your personal loan repayment plan instead.
Adjust the instalment due date
One of the most important factors in sticking to a repayment plan is your payday. Miscellaneous costs, last-minute purchases, and emergency expenses hit us every month. If your salary comes in after the due date for your loan instalment, you may struggle to have the money handy.
In such a case, approach the money lender and ask for a revision of the due date. Note, there may be administrative expenses involved here as the money lender will have to redraft the personal loan agreement.
Know the numbers
Financial wellness is all about juggling your responsibilities. Before you can come up with a feasible repayment plan, you will have to take a magnifying glass to your expenses and income. There are dozens of free apps on both Android and iOS that can help you to do this. Unfortunately, many people struggle with the discipline needed to enter every transaction.
However, those who follow through find that the insight is invaluable. A bird’s eye view of where your money is going forces you to confront any poor spending habits and irresponsible expenses. It also shows you exactly where you will have to cut back to make the next instalment.
Prioritize your debts
Now that you know where to cut back on expenses, the next step is to determine where your income will go. All debts are not created equal and you have to determine who gets paid ahead of the others. You will have to assess two factors:
- Size of each debt
- Interest rate on each debt
Together, they dictate the amount by which your debt increases if you do not pay them in full. The idea is to gradually climb out of the debt hole by ensuring that you either maintain or reduce the amount owed.
You can use either the debt snowball or debt avalanche strategy.
Debt snowball – List all your debts and make the minimum payment every month to prevent any increase in debt. Pay off what you can of the smallest debt with any money that remains. Over time, you will pay off that debt, and you can apply the same strategy to the next smallest debt.
Debt avalanche – List all your debts and make the minimum payment every month to prevent any increase in debt. Pay off what you can of the debt with the highest interest with any money that remains. Over time, you will pay off that debt, and you can apply the same strategy to the next high-interest debt.
Control your spending
Last but not least certainly applies here. Perhaps the most crucial change that you will have to bring into your life is budgeting. Ask yourself if you are really broke or do you tend to overspend? If it is the former, use the steps above to come to a compromise financially.
If it is the latter, it is time for serious introspection. Life is not going to change until you make a conscious effort to address why you are in debt. Some simple changes and self-control will give you the money you need to repay your loan in Singapore and even start saving for the future. It is literally all in your hands.
Galaxy Credit is a licensed money lender that specialises in personal loans in Singapore. If you need a loan or help to consolidate other loans, contact us today for help.