Yes, paying off a loan or any type of credit takes time and money. However, your mental attitude toward borrowing and how well you stay committed to paying off your balances, lowering your debt, and ultimately rebuilding your credit are just as important.
We know it’s not always easy to stick to a budget while feeling the need to make sacrifices to improve your credit. So here are some simple tips to help you stay the course and wipe out debt:
Don’t always borrow the max
Whether you’re applying for a loan, credit card, or line of credit, you will be told the maximum amount you can borrow. That doesn’t mean you have to take it all. Before you accept a loan or a new form of revolving credit, like a credit card, ask yourself if you can live with less. Taking less means smaller payments and keeping more of the money you make.
Experiment with payment terms
Lenders have a vested interest in helping you pay off a loan. If you’re struggling with the monthly amount, you usually have the option to negotiate a new term. This means you add time to the length of the loan and your payments go down to become more affordable. The catch is that you end up paying more interest over the life of the loan. This is a financial balancing act between affordability and cost. You can use an online loan calculator to see the effect of adding time to your loan.
Outsource your self-control
If you forget dates (and who doesn’t from time to time), you might miss a payment by accident. This would be bad because missed or late payments are two of the common ways people end up with low credit scores. To help you make every payment on time, set up automatic loan payments that line up with your paycheque or other sources of income. By making it automatic, you’ve outsourced a major stressor and every on-time payment can help you rebuild credit.
Make a lump-sum payment
If you find yourself with some extra cash and you feel the urge to spend it, hit pause and compare whatever you’re about to buy with how good it will feel to wipe out your debt. Suppose you get a bonus or a tax refund. A shopping spree at the mall might make you feel good for the day or maybe a week. But nothing at the mall will change your life. On the other hand, making the occasional lump-sum payment on a loan can get you out of debt faster and help you graduate to better interest rates.
Consider a co-borrower
Asking someone to be your co-borrower is a big deal because they will be responsible for your loan payments if you can’t make them. No one knows you better than your family and friends and, if they are willing to put their faith in you, it’s because you’ve earned their trust. Adding a co-borrower will almost always result in a better interest rate because the loan is considered less risky.
The biggie – ask for help
Most of the people in your life want you to succeed. That includes seeing you reach your financial goals. Let them know that you are on a serious mission to reduce debt and earn a better credit score. They’ll understand if you don’t go out as often or if you want to do something that doesn’t cost a lot of money. But they can’t support you if you don’t share your money mission.
Set realistic goals
You can’t hit a target you can’t see. It can be as easy as committing to making every loan payment on time or setting a debt-freedom date. Set a goal for yourself over the next few months and plan to celebrate your success after you’ve made it happen.
If you have any questions about how to manage an installment loan, how much to borrow, and the best ways to rebuild credit, the team at your local easyfinancial branch is here to help. Simply give us a call at 1-888-502-3279 or drop by one of our 400+ branches across Canada.
Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.