The most crucial aspects that are involved in the total cost of your Loan Repayment are:
1. Your loan amount.
Quite obviously, the loan amount you apply for will determine the rest of your costs, like a ripple effect. Make sure you don’t borrow more than you absolutely need to cover your purchase or to cover your unforeseen costs. The amount you qualify for will be determined by your credit score which is influenced by previous loan repayments of course (even in the form of credit cards!).
2. The interest rate.
This is the cost of borrowing money. More specifically, the cost associated with the privilege you are granted to spend in the present, with the ability to pay off your debt in the future. Your interest rate will determine your monthly loan repayment amount. Thankfully, a maximum rate is set in place that lenders can charge you. Make sure your interest rate falls within this category and that you understand the principle of compounding interest. If you don’t, take a few moments and Google it!
3. Your monthly payment amount.
This is determined by your loan amount, interest rate, and the loan repayment period. Drawing up a budget will help you to know how much you will need to set aside of your paycheck every month to make the loan repayment. If you’d like to look at a good example on the influence your choice of repayment period has on your instalment, take a look at this great example from BetterLife Loans.
4. The number of instalments.
Your loan repayment schedule is of utmost importance. Ensure that you are fully aware of every detail to make certain that you can make prompt payments every month. Not defaulting on your instalments is key to keeping a clean record and also influences your future credibility, should you ever need to refinance or consolidate your debts.
5. The timeframe the Personal Loan must be paid back in.
This is the time in which you are able to settle the loan amount as agreed upon by you and the lender. This will also draw upon effective budgeting skills as to not default on your loan repayments. Although these factors may seem simple in determining your total loan cost, always ensure that you double-check every detail when applying for a loan. At Fincheck, we believe in total transparency and we only deal with credible lenders.