How to Budget so that you can Easily Repay Short Term Loans
We are often advised to make sure that we can manage the repayments on any loan that we take out, such as short term loans. In fact short term loans are often the one that we are warned most about because the repayments can tend to be one large lump sum and therefore can be quite a significant chunk of money. It is important therefore, if you take out any loan, including a short term loan, that you budget carefully to make sure that you will be able to repay it when you need to. There are a number of steps that you can take when you are budgeting:
- Find out how much the repayment will be
- Look at your past finances
- Think of ways you could earn more
- Think of ways to spend less
- Have a back up plan
Representative Example: £400 borrowed for 90 days. Total amount repayable is £561.92 in 3 monthly instalments of £187.31. Interest charged is £161.92, interest rate 161.9% (variable). Representative 305.9% APR. We are a broker not a lender. We don't charge fees. We don't sell your personal information.
So it is important to start by finding out how much you will be expected to repay. Remember that this will not just be the amount you borrowed but will have interest and possibly fees on top. The lender should tell you how much you will be expected to repay and therefore you will be able to find out easily. Then looking at your past finances will allow you to see whether you normally have enough money left to pay back such a sum. You should be able to work it out using past bank statements. If you think that you will not have enough then it can be wise to think of ways that you could earn more or spend less so that you can afford it. There are some tips below.
Tips on how to earn more
Obviously how you earn more will depend on your skills and how much time you have. However, there may be some ways that you can get some extra money that you have not thought of before.
- Work some extra hours – it can be worth asking your current employer whether they have any extra work available. A few extra hours could make a difference to your salary that will make repaying the loan a lot easier.
- Take on a second job – if you have the time, it could be worth looking for a second job, even if it is temporary work so that you can get some extra income.
- Sell things you no longer need – many of us have items we no longer need or use. Selling them online through auctions, classified adverts or social media pages or offline in table top, jumble, garage or car boot sales could help to raise some extra money to put towards the loan repayment.
- Rent out a room/driveway/garage – if you have the spare space then it can be worth renting out space that you have to get some income. If you rent or have a mortgage though, you will have to ask the landlord/banks permission first.
- Do some freelance work – freelance work can be a great opportunity to use your skills to earn some extra money. You should be able to find jobs online and offline and hopefully find enough to get the money that you need.
- Find online work – there are online jobs out there would could help to increase your income. These are very varied, so you should find something that you like, although there are scam sites out there that you need to be careful of.
It is worth being aware that any earned income in the UK, has to be declared for tax purposes.
Tips on how to Spend Less
As well as earning more, spending less can be another way to
- Compare all prices – it is worth comparing prices on everything that you buy so that you are not spending more than necessary. Be careful that you are not buying really poor quality items though as you could end up having to buy it again.
- Only buy necessities – it is worth really cutting down your spending to just buy the things that you really need. Remember this will just be until the loan is paid off and you have got through the next few months and got your finances back on track.
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It is really advisable to have a plan of action just in case you either cannot manage the repayment or you struggle to pay for things after making the repayment. Consider whether you can get an advance on your salary, ask friends or family to help, sell more things or try some of the tips for above.