If you’ve recently gotten a small personal loan online such as a payday loan online or title loan to cover your expenses, repay credit card debt, or even to help pay for a home improvement project, you may be wondering what steps you can take to manage your money more effectively.
So, in this guide, we’ll walk you through a few tips and tricks you can use to make sure your financial future remains bright.
1. Create a Budget Including All of Your Expenses & Income
First, we highly recommend that you take the time to create a comprehensive budget – tracking all of your income and expenditures for the month. This will help you learn more about where your money is going when you spend it.
When building a budget, it can be very helpful to create two different categories of expenses; essentials and non-essentials. Essential expenses are the expenses that you have to pay every month, with no exceptions. This includes things like:
- Minimum credit card payments
- Utility payments (gas, phone, electricity, etc.)
- Personal loan payments
- Housing payments (mortgage or rent)
- Auto loans & maintenance or other transportation costs
- Childcare/school costs
- Food from the grocery store
- Insurance payments
It may be possible to reduce some of these expenses – by switching phone providers, for example – so that may be worth looking into. You should also look at your non-essential expenses, like:
- Gym memberships
- Streaming service/cable subscriptions
- Going out to movies, restaurants, bars, etc.
- Shopping for clothing, electronics, books, and other consumer goods
- Spending on gifts
If you’re looking to save more money, this is where you should start. Looking at your monthly spending in these categories can help you find out where you spend the most – and how you can reduce your spending.
2. Make Sure You Repay Your Loan on Time
Missing a monthly payment on a personal loan can lead to damage to your credit score – as well as penalties and fees for late payment. If you fail to pay for multiple months in a row, your credit score may be further damaged, and your loan will be sent to collections.
Do your best to make sure you budget for the repayment of your personal loan – and make sure you have the cash that you need every month to make your payment. Failing to do so can lead to further financial difficulties.
3. Set up Automatic Bill Payments on All of Your Loans
This is a great idea not just for your personal loan – but for all of your debt, including credit cards, mortgages, auto loans, and so on, as well as recurring expenses like cell phone bills and utilities.
Almost all banks and utility companies support automatic bill payments, so we recommend heading to each provider’s website or app to sign up for automatic payments. You may need to contact the company directly and speak to customer support to do this, in some cases.
Then, when each bill comes due, the money that you owe will automatically be pulled from your account. You won’t have to worry about late payments or fees, so this is a great way to get some more peace of mind when planning your finances.
Note, however, that you must make sure you have enough money in your checking account to pay for each bill – or you may overdraw your account and be penalized by your bank. It may be helpful to make a schedule or calendar of your automatic payments – then check your bank account a few days in advance to make sure you’ve got the cash you need for each one.
4. Consider Paying More Than the Minimum on Your Personal Loan
You can save a lot of money on interest if you pay down your personal loan early. How much? Let’s take a personal loan for $10,000 at 7% interest (APR) over 5 years as an example. If you pay a minimum monthly payment of $198.01, you’ll pay the loan off in 5 years, and you’ll pay $1,880.72 in interest.
However, if you add an extra $100/month to your payments, you’ll be able to cut off more than a year from the loan repayment time – and you’ll only pay $1,161.33 in interest. By paying a little more than you owe each month, you can save money on interest and eliminate the debt sooner – that’s a win-win.
Make sure you know your loan terms before doing this, though. While most personal loans let you pay them off early, some lenders may charge a fee for early payoff – so take this into account when deciding on the best option for your needs.
5. Be Careful About Taking on More Debt
If you have taken out a personal loan, you may want to be careful when it comes to taking on other debt. For example, you should make sure you don’t overspend on credit cards – pay them off each month to ensure you’re not paying extra money on interest.
You also may want to consider delaying things like buying a new house and moving from your current home or buying your first home. Buying a new car while you have a personal loan also may not be the best idea.
As a rule, you should make sure that your monthly debt payments do not exceed 43% of your gross monthly income. A higher debt-to-income ratio could make it harder for you to qualify for some types of loans and can damage your credit score. Not only that, but it may be hard to repay all of your debts along with your essential monthly expenses.
Follow These Tips to Manage Your Money After Getting a Personal Loan
We hope these tips have helped you learn more about the steps you should take to improve your finances after getting a personal loan. As long as you manage your money wisely, a personal loan can be a great choice!