When different loans are paid at various times of the month, the amount is usually much smaller, than if all the loans are consolidated and only one payment is made each month.
Whilst it is true that remembering to make multiple payments throughout the month can be a cause for stress, not having the funds to make the one larger payment can also be a detrimental factor.
However, with a bit of planning and discipline, this can be easily overcome.
Planning for Sufficient Funds to Pay the Loan
- Collect all the loan statements, such as the home loan, car loan, personal loan and credit cards, Make a list of the due date and the amount due.
- Ascertain the eligibility to consolidate all the loans into one. This depends on the equity available in the home and the capacity to repay. (There are ‘How Much Can I Borrow’ calculators available on many banks’ and other financial institutions’ websites.)
- Work out how much the repayment will be if the loans were consolidated. (There are ‘Monthly Loan Repayment’ calculators available on many banks’ and other financial institutions’ websites.)
- Decide how much the repayment is each month. This can be the minimum amount required by the lending institution or, if the wish is to pay off the loan sooner, then an increased amount should be considered.
- Determine how much needs to be saved each week to get to the required amount and work out a ‘savings plan.’
Saving to Have the Required Funds on the Due Date
It is much easier to put aside a smaller amount each week than to find a large sum at a specific time of the month. There are many ways that can be utilized to achieve this. However, it is very important to open a designated Savings Account for this purpose.
Once this is done, there are several ways to get the necessary funds into the account.
- Ask the employer to deduct the specific amount each week from the wages and credit it directly into the Savings Account. This is one of the best ways, for two reasons:
- Once the authority has been given to the employer, one can be confident that it will be done without fail; and
- The employee gets used to receiving a reduced amount each week and can budget accordingly.
- If the employer is unable to comply with this request, then a Direct Debit will have to be set up for the required funds to be transferred from the person’s transaction account into the savings account each week. Again, once set up it is an automatic process.
- However, if payment is received in cash, then it is imperative that the required amount is deposited into the savings account as soon as possible, prior to using the funds for any other purpose. This is where the actual discipline comes in.
Although handling one loan repayment requires some planning and discipline, debt consolidation should be seriously considered because it can save time and money.