Repaying your loans on time is a big responsibility. You agreed to the loan terms and you need to make sure you pay on time. But life can get in the way, making it difficult to meet all your commitments. What alternatives are there? This article covers everything you need to know about paying loans, and how a loan payment app can help you to pay every installment on time.
Any loan arrangement you enter into is a serious agreement that you need to strictly adhere to. It doesn’t matter whether it is a credit card with a minimum monthly payment, a personal loan with monthly installments or a payday loan with an agreed payment date.
It is important to understand what happens if you miss a payment, and why making payments on time is so important. Let’s take a look at some of the consequences of missing a payment.
- Loan fees and charges. Most loan agreements include penalties for missing scheduled payments. Penalties differ, some providers charge a fixed fee for missing a payment and this could be anything from $15 to $35. Other providers will amend your agreement: you may lose access to preferential interest rates, for example.
- Overdraft charges. Your checking account may feature an overdraft facility. If you have insufficient funds to pay a loan installment your bank may approve the payment and charge you a hefty overdraft facilitation fee, and you will still need to repay your bank the amount you are overdrawn by.
- Bad credit. Lenders report missed payments to your credit file. Every time you miss a payment a marker is left on your credit report. Future lenders will view any history of bad credit with concern. Missing the odd payment or two does not mean you will no longer have access to credit, but you will miss out on the best deals and the lowest interest rates.
- Accumulating arrears. Imagine this scenario: you’ve already missed one payment because you couldn’t afford to make the payment on time. The payment still needs to be made, increasing the challenge of meeting your obligations in the next month, so you remain one payment behind. It is easy to fall into a spiral of accumulating missed payments, month after month.
It should be clear that it is very important that you make your loan payments on time. It will be costly if you don’t and it can make it difficult to get credit in the future. That’s why you need a strategy.
How do you prevent falling into a spiral of missed payments? Monitoring your outstanding debts is the first step in your debt strategy. Do that and you will know how much you need to budget for debt repayments. It seems obvious, but many of us have multiple loans including credit cards and it is not that hard to lose track. A debt tracker app can be a good solution. Here are a few options:
- Debt Manager. For iOS, this app helps you keep track of your debts including how much debt is outstanding. You can track your monthly payments using this app, and it helps you to see the impact of interest rate changes. The app also syncs across to different devices so you don’t need to re-enter your information.
- My Debts. An Android app, My Debts helps you organize your debts, including alerts that remind you when there is a repayment deadline on a loan. The app can alert you via calendar events and also supports the tracking of bills, so you can keep up to date with all your monthly repayments.
- Debt Payoff Planner. Sometimes you need a little more insight into how your debts are getting paid off. This top Android app shows you not only how much you need to repay in a given month but also helps you to clear your debt using the snowball method. The Debt Payoff Planner is a great tool to prioritize your repayments.
Even with the best of intentions you can still find that you are short on money and that it is difficult to repay your debts on time. At other times your debt tracking app will predict that you are facing a payment crunch soon.
We will look at two types of apps that can help you pay off debt: in this section, we cover apps that let you borrow a little bit of money to make sure you make this month’s payments. Next, we will look at apps that help you to consolidate your debts.
As discussed in the previous section, missing a payment can lead to all sorts of problems. If you’re in a crunch and at risk of missing payments you should consider one of the following apps, all great for borrowing smaller amounts:
Earnin App. A great option if you can link it to your employer, Earnin can help you out with as much as $500 which is plenty for covering lots of different types of loan payments. Best of all Earnin is free and easy to set up. Tips are optional if you like the app and your loan is automatically repaid on pay day.
PockBox.com app. A good option for people with less than stellar credit, PockBox can set you up with a loan from $100 all the way to $2,500. The provider connects you to a range of lenders to find you a great deal. Consider applying at PockBox.com if you are at risk of missing payments and already have bad credit.
Avant app. Avant’s credit score requirements are more strict, you can’t apply for a loan at Avant if you have significant problems with your credit file. However, Avant offers lower APRs with some applicants getting interest rates as low as 9.9% APR. Completing the Avant application process takes several working days, so Avant is a good option if you know that you are headed for trouble but still have a few days to make a plan. Check out Avant’s website here.
Borrowing just to make your next loan payment is one option and could work perfectly well if it’s just this month that is especially difficult for you. But sometimes loan payment difficulties build month-on-month and you may find yourself repeatedly taking out loans just to make ends meet.
Consider debt consolidation as an alternative. With debt consolidation, you borrow a large sum at an affordable APR so you can pay off smaller, more expensive loans. Debt consolidation can reduce your interest costs and reduce the number of payments you must remember to make. These apps are good options for debt consolidation:
Prosper app. You need a good credit score to apply for a Prosper loan, but the low APRs on offer and the ability to borrow large amounts from Prosper are attractive. Paying off existing debts with a Prosper loan can mean that you significantly reduce the amount you pay in interest charges. However, will find it difficult to become eligible for a Prosper loan if you already missed payments or defaulted on debts.
LendingClub app. Like Prosper, LendingClub can furnish you with a large loan – up to $40,000 in some cases. Though LendingClub offers loans to applicants with a less than perfect credit profile, you will need to check the APR on offer. You may get a LendingClub debt consolidation loan that has an APR lower than your existing loans, triggering significant savings compared to your existing loan repayments.
Getting rid of debt is, of course, the ultimate objective. Debt is expensive to service, the interest you pay on debt is a dead loss – you will never see interest charges returned to you, the money is lost. That is why it is so important to focus not just on making the required payments but to completely repay your debts as soon as you can.
Becoming debt free takes a concerted effort and a plan. Apps can help – the Unbury.me app, for example, can help you work out a payment plan to reduce your debts as quickly as possible. A methodical approach to paying off debt is key, here are two approaches we recommend:
Snowball method. The snowball method is a great way to help you feel you are achieving a victory over your debts. With the snowball method, you pay back the smallest debts first, moving on to larger debts as smaller accounts are closed. Doing so gives you a sense of progress as you rapidly reduce your individual debts, and many people find the tangible sense of progress very motivating.
Debt stacking method. We’ve mentioned many times how debts involve high interest costs. The debt stacking method involves paying off the debts with the highest APRs first. This method will save you the most money in the long run, but it requires persistence if you have large debts as it can be a long time before you “clear” a loan.
No matter how you decide to unbury yourself from debt, loan payment apps are a useful tool. Apps can ensure that you make your minimum payments and stay out of bad credit. You may also find that a loan payment app is a great way to dramatically reduce interest costs.