Personal loans have been popular in Singapore today hence a lot of people applies to personal loans whenever they need money. There are several ways on how a person will spend a personal loan and what’s good with a personal loan is you can pay them depending on the terms you want.
There are borrowers nowadays who have personal loans that would choose to pay their loan earlier. Paying your loan earlier actually has other advantages aside from being able to save more money from the annual interest rates moneylenders’ charges on your loan.
Interest rates in personal loans are surely a problem to borrowers which grows higher and higher over the years, but if you can pay your loan as early as possible, then you don’t have to be concerned anymore. Another good thing with paying your loan earlier is that you can now have your monthly salary all by yourself rather than having a part of it to the repayment amount.
There are also some other advantages when you pay your loan earlier which we will be discussing such as when you need to get a mortgage loan or when you are starting to save for your retirement:
1. For Mortgage Loan
Whenever you are applying for a new loan, the moneylender would ask for your credit history, and if they found out that you still have an unpaid loan, you’ll get a lesser chance of getting a big loan.
A mortgage loan is intended for those who wanted to buy a house and buying a house would need a big amount of money, but with the small amount of money you can loan due to your unpaid loans, it would be harder for you to get the house that you wanted.
When applying for a mortgage loan, they have to check your Total Debt Servicing Ratio (TDSR) where they will measure how much of your monthly income will be given to your debt, and 60% is the only cap for the TDSR. If ever your mortgage loan would make your TDSR go further with the limit, they will not allow you to get the loan.
To save yourself from being into this situation, make sure that you can pay your loan before you would apply for a mortgage loan; this way, your TDSR would go lower thus making you qualified for a mortgage loan.
2. Retirement Savings
There are various reasons why we have to save money, and one of those is for our retirement. For the past years, you have been working hard thus awarding yourself with a good retirement plan isn’t a bad thing.
You may think that it is still too early to think for retirement, but once you are there already, you would be glad that you’ve started saving and planning for it earlier so you can still enjoy life and make the most of the money you’ve earned through the years of hard work.
If you are planning to invest money for your retirement, you may choose to have your retirement plan, but if you still have a loan which you are currently paying, it would be hard for you to balance the payment for your current loan and retirement plan.
In this case, it is best if you pay your loans first and once you are done paying your loans, you now have the money you need to pay for your retirement plan without having any financial stress from all the bills and loans you have to pay every month.
How to Repay Your Personal Loan Early?
There are a lot of ways on how you can repay your loan earlier without getting exhausted like the following:
● Round up your repayment
You can do this by simply rounding up your payment to the nearest $50, and it is even better if you can round it up higher to $100 per month. This might look small but if you are going to do this every month, rounding up your repayment is a great help to lessen your loan and repay it earlier.
● Cut expenses
There are ways on how you can cut your expenses like checking on your monthly budget and making changes on where you can cut back. You may also opt to save from your electric bill such us saving electricity through turning off your AC earlier every morning or unplugging any appliances that are not in use. These may be small moves, but they can surely help you save more money.
● Squeeze extra payments
There are various ways on how you can squeeze extra payments onto your loan such as paying the money you’ve got from your year-end bonuses to your personal loan; this is already a big amount of money that you can add on your loan repayment.
Repaying a personal loan earlier may look like a hard goal, but if you are determined to reach your target, you won’t have any difficulty doing it.