With great power, comes great responsibility. Of course, paying back a loan is no exception. Even though you might not be in the ‘seat of power’ as the debtor, and not the holder, of the note, that doesn’t mean you are powerless when it comes to payback strategies. In fact, paying back a loan in a timely manner means you have cemented your good credit standing for many years to come. When it comes to paying back a loan in a timely and responsible fashion, there are some tips that we can all remember to keep you on top of your bills without blowing your budget.
Old school advice – “Just pay it”
The easiest way to ensure that you pay back the balance of a loan is simply to pay it off in full. That is, if you have the means and resources to do this. If you don’t, you might need to implement some payment strategies that will stand the test of time.
Budget for it before you buy it
One of the biggest financial pitfalls out there today is lack of budgeting for something before buying it. All of a sudden, folks get wound up with wide-eyed childlike enthusiasm and plop down a credit card or sign a loan application without thinking it through. Mind you, that doesn’t mean that you can merely afford it now, but consider what would happen if you were unemployed or disabled. What then? Make sure you live beneath your means and budget for every entity you owe, before signing on the dotted line.
Set reminders. In fact, set multiple reminders
Just because you sign up for a bill in the mail or even electronic billing doesn’t mean that things don’t get lost in cyberspace or courtesy of the U.S. Post Office. It’s important to make a note of when your bills are due, how much you need to pay and set up reminders on multiple venues. For example, if your Visa bill is due on the 20th of every month, set up a reminder to pay it on the 15th of the month on your personal calendar, work calendar and even your smart phone. Multiple fail-safes mean no missed or late payments.
Think “Auto pay”
If you are leery about having pop up reminders smack you in the virtual face all day long, consider signing up for auto pay either using your online bill paying system or direct through the merchant website. As an added bonus, if you sign up for auto pay on a merchant website and have a debit rewards card, paying with that in lieu of your checking account means free points. It’s almost like paying yourself back for being responsible.
Pay more than the “suggested amount”
The best way to ensure you pay off a loan is to look at how much you are actually paying for that super cool item you had to have over time. Amortizing a loan that shows you are paying over two times the original value of any item is enough motivation to pencil in a little extra on your Visa or MasterCard payment each month.
Responsibility and early debt payoff is a wonderful feeling. Since building and having credit is such an essential part of our financial lives and long term financial well-being, using credit responsibly and setting up full proof payment methods is more important than ever before.