Choosing Your Loan Repayment Period

Choosing Your Loan Repayment Period
One of​ the​ crucial factors to​ consider when getting a​ loan is​ the​ length of​ the​ repayment period that you​ will apply for .​
This will affect how much you​ pay each month as​ well as​ the​ total amount you​ will pay back .​
As well as​ getting the​ length of​ repayment period right,​ you​ need to​ choose the​ right method of​ repayment so that you​ can afford the​ repayments whilst still paying your loan back quickly .​
Here is​ some advice about choosing the​ right repayment period for your loan.
Shorter period is​ better
Whenever you​ are looking to​ get a​ loan,​ work out what the​ shortest repayment period you​ can afford is​ for the​ amount you​ want to​ borrow .​
Although longer repayment periods will mean that you​ pay less each month,​ you​ will probably pay more in​ total because of​ the​ extra interest you​ will pay over the​ longer period .​
Always go for the​ shortest period you​ can afford to​ pay,​ as​ this will help you​ to​ pay your loan off more quickly and also save money by paying less in​ interest.
Standard loan repayments
As well as​ working out the​ length of​ your repayment,​ you​ need to​ consider the​ different methods of​ repaying your loan .​
Although not all loans offer different repayment plans,​ it​ pays to​ know which plan will work for you​ so that you​ can find a​ loan that fits these criteria .​
The standard repayment method is​ the​ most common,​ where you​ simply pay a​ fixed amount each month until you​ have paid off the​ entire loan .​
With this type of​ repayment you​ know that you​ will be paying off the​ loan steadily each month,​ and after a​ certain period you​ will have paid the​ loan off.
Graduated repayment
There are some loans on​ the​ market that offer you​ a​ graduated repayment scheme,​ meaning that the​ loan repayments start off small but then increase after a​ certain period of​ time .​
This is​ good if​ you​ have taken out a​ loan and expect your earnings to​ increase over time,​ and so allowing you​ to​ afford higher repayments .​
This method of​ repayment is​ less common and so you​ will need to​ shop around to​ find a​ loan like this.
Balloon payments
Some loans allow you​ to​ pay just the​ interest each month for a​ number of​ years,​ and then pay the​ final balance off in​ one go .​
This type of​ repayment is​ good if​ you​ know you​ will receive a​ lump sum of​ money in​ a​ few years but need to​ get hold of​ cash now .​
This type of​ loan means you​ pay little at​ the​ beginning,​ but at​ the​ end pay off the​ final balance .​
However,​ you​ generally end up paying more with this type of​ loan as​ you​ are only paying interest for the​ first few years of​ the​ loan.
Changing the​ terms
Although choosing the​ right loan period is​ important,​ there is​ always the​ possibility that you​ can change the​ terms if​ you​ need to​ .​
If you​ find that you​ can afford to​ pay off the​ loan more quickly,​ then try and do this,​ although beware of​ charges for early repayment .​
Also,​ if​ you​ find yourself struggling to​ pay off your loan then you​ should speak to​ your lender and try to​ arrange an​ extension for repayment so that you​ can more easily manage the​ payments .​
However,​ remember that the​ longer you​ take to​ pay off the​ loan,​ the​ more you​ are paying overall.

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