Tips For Paying Off Your Personal Loan

Personal loans are a great way to access cash quickly and can be really useful for short term cash flow issues. We’ve all been there – unexpected washing machine purchase needed, an upfront deposit required to lock in your dream holiday, wanting to upgrade your car because that newer model will cost you less in the long run.  Whatever the reason, personal loans can be a great solution to meet your funding gap. 

Sometimes, extra cash is simply needed quickly – an emergency surgery or to meet other health needs. Perhaps you need to finance a trip to support a family member. Whatever your reasons, a Nectar personal loan can help you access money quickly, and in many cases, all it takes is the completion of a simple online application form, with cash available in a matter of hours.

Before you apply for your next personal loan, you’ll want to have a clear plan for how you intend to pay the money back. We’re keen to share our tips for paying your debt off as quickly as possible and maintain control of your finances. You’ll want to know how much you can borrow, your interest rates, your minimum repayments and how often those repayments are required. Leading personal loan providers such as Nectar don’t charge any early repayment penalties and this is worth checking upfront so you have the flexibility to repay the loan early if you decide too.

Paying off your debt as quickly as possible is good to prioritise, but not at the expense of ensuring you have cash on hand for emergencies. So, how can you pay off your personal loan faster, at a level that is right for you? Let us walk you through our top six tips to pay off your personal loan faster.

Tip 1. Pay off the debt with the highest interest rate first

Multiple loans? More than one credit card? Hire purchases and Afterpay purchases? Student loan?  Mortgage? Your first task is to make a list of all your outstanding debts, how much you owe on each, and the interest rate you’re being charged. Rank your list in order of which debt has the highest interest rate – this should be the debt you prioritise to pay down faster. Work out if you can free up any other cash to pay that high-interest debt by increasing your required payments, or paying it more regularly.

Typically, credit card debt and hire purchases have high interest rates – be particular in paying these debts on time. Also check the account fees, late payment fees and interest charges you’re incurring to give you a sense of the big picture. 

When it comes to selecting a personal loan, these are important things to consider too – does your preferred loan have origination fees, late payment fees, hidden fees or penalties? At Nectar, we provide up-front rates and guarantee no hidden fees or charges. We believe transparency and making things simple around our personal finance options is key. Learn more about our loan types, interest rates and finance term. 

Tip 2. Make a budget

If you’re new to budgeting, there is no better time to start than right now. Understanding how much money you have coming in, and how much money you spend each week and month, can really help you prioritise how you want to spend your hard-earned money. If you’re considering getting a personal loan, you’ll want to think about how you’re going to repay it, so you may need to reduce expenditure in some areas so that you can afford your repayments. Let’s take a look at some of your budgeting options, and ways you can save on household bills.

It’s easy for unnecessary expenses to creep up on you. Simple things like cancelling subscriptions, swapping brands of everyday items or renegotiating essential services such as internet providers or electricity plans can go a long way to saving you money each week. A couple of hours invested every week on reducing your expenses can go a long way.

Top Budget Considerations:

• Review and cancel unused subscriptions – those regular subscriptions can really add up. Whether it’s Sky TV that no one in your household is watching any more, or multiple streaming networks (do you need Netflix and Apple TV?), there are some monthly savings to be made that really add up. Subscription services these days extend to food, alcohol, magazines, clothing and IT related subscriptions for cloud storage or file sharing. Take some time to consider if you need them all, or whether you could downgrade your subscription to a cheaper option.

• Review and renegotiate your insurances – from house and contents, car, health, life insurance and income protection, an individual’s or family’s insurances can really start adding up. Familiarise yourself with what you’re currently paying, and whether you could bundle them with one provider for a better deal, or use an insurance broker to check you’re not paying too much.

• Review and renegotiate your mortgage – interest rates are low at present, so capitalise on this and look to secure a lower interest rate on your home loan.

• Reconsider using Afterpay and LayBuy payment options – it’s hard to budget when you use retail apps like these. By not using them, you can reduce your ‘impulse’ purchases, think about whether you really need the item, and if so, save up for it instead.

• Review and renegotiate your utilities – it’s easy to stick with the mobile phone provider, electricity company or internet provider you’ve used for years, but you may not be getting the best deal possible. Shop around and see if you can bundle your utilities or change the current package you’re on for a better deal.

• Rethink your holidays – swapping flights for road trips and rethinking your accommodation from hotels to camping grounds or cabins can ensure you continue to take a well-earned break, but also reduce the overall cost of your holiday.

• Swap paid activities for free ones – we all love booking in concerts and bucket list activities, but what if you committed to filling your weekends with free activities for a change? You’ll no doubt be just as entertained, find some new favourite haunts and save your wallet while you’re at it.

• Eat in, not out – dining out can really add up. Even if you’re heading to the cheap local restaurant, or only buying one takeaway coffee a day. Imagine if you self-catered for the entire week? Making your own dinner each night, and enough leftovers for lunch the next day can be a huge weekly saving. And swapping the takeaway coffee for a home-brewed one can add up over time too.

• Consider your transportation options – whether you currently drive, or use public transport to commute, understanding your transportation costs can be huge in cutting down weekly expenditure. Owning a car and paying for registration, servicing, insurance, petrol and parking can all add up if you only occasionally use it. Consider other options such as an eBike or shared car service for urban dwellers. Using public transport can also add to your daily exercise as you walk to and from your local bus stop or train station.

Tip 3. Make debt payments on time

The last thing you want when you commit to a personal loan or another financing option is to be hit with additional fees and charges. These can be easily avoided by understanding your payment amounts and when they are due. Time your payments for shortly after payday so you’ll have money in your account, then set a calendar reminder or arrange an automatic payment. These steps will ensure that late payment fees, dishonour fees, overdue fees and interest are a thing of the past. 

Be aware of any other fees you might have to foot as well – annual fees, broker fees and cash advance fees  – being forewarned, means you can avoid these as much as possible.

Tip 4. Make extra loan repayments when you can

If you find you have a little extra money each month, work out the best loan or debt to make extra repayments too. Prioritise the debt with the highest interest rate – an extra payment each month, or rounding up your repayment can make a real difference over time.

You might get lucky and get a cash bonus at work, you might finish off paying another loan, or you could get a small inheritance. These can all be great ways to make a dent in paying your debt.

You’ll need to make sure you won’t get charged penalties or fees for making extra repayments. A Nectar Personal Loan doesn’t have these fees in place, so you can pay off your personal loan in full, any time that suits you. 

Be aware that not all loans need to be paid off quickly. People with student loans should remember that their loans are currently interest-free, so this should be a low priority debt to repay. Home loans are also set up to be repaid over a long period of time, so don’t worry about repaying this first (their interest rates are also likely to be lower than other forms of financing). 

Tip 5. Consolidate your debt into a single loan

Debt consolidation loans are popular ways to manage multiple loans or different types of debt. Say, for example, you have a car loan, two credit cards and a small personal loan. It can be difficult to remember all the different repayment  dates and keep on top of how much you owe. By consolidating these debts into one single loan, you’ll have one interest rate, one repayment and one debt to focus on. This can be hugely helpful for some people to keep on top of their debt commitment. 

Tip 6. Seek financial advice

Struggling to keep across your loan commitments or stick to your budget? A financial advisor or budget advisor can really help you to get your finances back on track. Don’t be afraid to reach out to your lender too if you’re struggling with repayments – there may be options available to you such as changing your payment dates or adjusting your repayment amounts.

Free budgeting advice is available from services such as Money Talks. These services are confidential too, so may be less daunting than reaching out to a friend or family member.

We’ve also pulled together some great tips about getting on top of your debt. Actioning just one or two lifestyle changes can make a real difference.

Get started with Nectar

We’ve given you plenty to think about it when it comes to paying off your loan sooner. If you’re keen to get a personal loan, you can get started with Nectar and receive a conditional approval including your interest rate, maximum borrowing amount and repayment options in minutes. Borrow better, faster today!

*Nectar’s lending criteria and responsible lending checks apply.