How to Lower Your Personal Loan Payments
Personal loans can be an efficient way when you want to access funds for different business purposes. However, in case the payments are extremely high, it can negatively affect your cash flow.
With increasing rates, your personal loan repayments can become more expensive. It does not matter if you have one personal loan or several loans, when your monthly payments increase, it may be harder for you to manage the money while staying on top of the debt. To increase your monthly income you can take a look at our members’ exclusive system.
Lowering your personal loan payments can be one of the best ways to reduce the financial burden and access funds for different business purposes. However, make sure the payments are not excessively high as they may become a heavy burden on the cash flow.
Without further ado, here are several strategies you as an entrepreneur can use to lower personal loan payments.
How to Lower Your Personal Loan Payments
1. Repay Early
Even if you won’t be able to repay a loan in full, you may still reduce the interest amount and lower the payments. In case you have savings, consider making the lump sum payment on the loans. But check if any of the loans come with early repayment fees. If they do, you’ll incur a large percentage fee, which can negate an early repayment
But if you do not have some savings, take a closer look at the budget. Then set one if you don’t have any. Also, pay attention to your credit card bills, bank statements, and other paperwork so you can calculate the essential costs, along with mortgage or rent payments, utilities, taxes, and food costs.
Moreover, look at the amount you spend on the non-essentials and then see if you can find areas to make cuts. For example, do you really need four television subscription services? Can you go to a restaurant once or twice a month instead of every week? Note that any extra money within the budget can easily go towards paying off the personal loan.
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2. Adjust Your Loan Term
Extending your loan term can be another great way to lower the payments, which reduces your monthly payments but increases the overall interest you need to pay over the loan’s life. This method can be a wonderful option in case you require time for building up the business and increasing income.
You’ll need to discuss it with the lender or arrange another loan deal if you choose this option. By increasing a loan term, you’ll reduce the monthly payments but you’ll pay more in a long term. But if you are ready to repay the loan over the longer term, it can be a good option for you. In case you repay the loan over a relatively shorter period, you will pay more right now but eventually pay less interest, clearing your loan faster.
3. Get the Income Boost
Do you have some extra cash flow? Then try to make extra payments on the loan so you can pay off your loan much faster, lowering the overall interest costs. This will also improve your credit score and help you easily secure funding in the near future.
Carefully consider this method according to your personal circumstances. You may be able to switch to a more well-paid job than the one you currently have or negotiate a pay rise. But for the majority of business owners, neither of these options is possible, so maybe it’d be a good decision to look for a side hustle.
There are various side gigs in a marketplace like freelancing, food delivery, and ridesharing, amongst others, which can help you monetize one of your hobbies or skills. You can also try renting out the extra space in the home or selling items online.
But this doesn’t automatically mean you’ll need a roommate as a lot of sites enable you to rent out a garage space, driveways, as well as other areas that help you maintain privacy while earning a side income. Then you can use this additional income for reducing your debt.
Do you have a good income and credit score? Then you can be eligible to refinance the personal loan at a relatively lower interest rate. This will significantly lower the monthly payments and make them more easily manageable for the business.
The debt consolidation loan can help you merge unsecured debt into one single loan, which can be a great strategy, especially for those with high-interest credit card debt. It provides you with lower monthly repayments and more easily manageable obligations because you’ll have one bill every month. In certain cases, you can lock in the reduced rate, which will make your debt more affordable.
But note that refinancing requires a hard credit search that can impact your credit score. So you’ll have to choose the loan options carefully since some of them are exclusively available to individuals with excellent credit. In case your credit score dropped ever since you took out the current personal loans, they may offer you a higher rate, meaning the debt can cost you more in both the long and short term.
5. Contact the Lender
In case you have a great business plan and payment history, you can negotiate with a lender for a much lower interest rate. You can do this by providing a business plan and financial statements that show how you plan on improving your income.
Also, the lender may accept several scenarios, such as temporarily putting the payments into forbearance, creating a new, different repayment schedule, or settling a debt with a relatively smaller lump sum payment. This will allow you to stop making payments temporarily to get the finances under control.
But if you decide to negotiate with a lender, ensure to ask them what they’ll report to credit bureaus so you’ll know how settling the debt can impact the credit.
Considering the current uncertainty in the economy, it’s only natural to feel concerned about personal loan obligations. Luckily, there are many ways to lower personal loan payments. But it’s important to consider how making changes to the personal loan may ultimately impact your credit.
If you have temporary financial problems, try some belt-tightening for several months to get through it instead of taking action that can have adverse effects on the credit. Recognizing that personal loan payments can pose a difficulty will help you be prepared to find effective solutions as quickly as possible.