Avoiding Financial Stress During Loan Repayments

Staying on top of loan repayments brings a lot of stress. Even with a fair loan contract template, you might fall behind on payments if you’re not careful. In this post, we’ll show you how to avoid (and how to navigate) stressful late payments.

The Stress of Loan Repayments

Any loan, even a small one, can cause you stress. If debts start piling up, it might feel like there’s no end to your financial anxieties. There’s even the possibility that your whole situation changes between loan installments. This is sure to leave you worried about if you can keep up.

According to Experian, roughly half of students feel significant stress from their loans. No matter your situation, you could be in a similar boat. However, in a lot of cases, thoughtful financial planning helps. Budgeting alone can’t fix things if you can’t pay, but there are still ways forward.

If you’re already behind on repayments, not all hope is lost. You could still regain control of your finances without facing serious long-term issues.

Budgeting an Active Loan

Even if the loan is in manageable installments, you need to budget well. Just one miscalculation or unexpected fee can lead to late repayments. Track your income religiously, take stock of your debts, and figure out where you can reduce discretionary spending.

Discretionary spending is any non-essential payment. Essential fees are either fixed or variable. The latter usually refers to groceries, gas, and anything else that changes week-to-week.

Repaying your loan should always be a priority from the moment it’s active. Consider paying extra if you have more to give one week/month. You’ll definitely reduce your future stress this way; a tax refund at the right time could similarly help.

Be strict about reducing spending, but don’t remove everything that brings you joy. You can only fight off loan stress if you still find time to rest.

Avoiding Late Fees

Automatic payments can go a long way towards helping you get ahead of late fees. These could give you instant peace of mind; you don’t have to worry about forgetting. However, you must stay on top of your balance to stop the payments from bouncing.

You should also work hard to build an emergency “cushion” with several months of expenses. It might even help to create a separate buffer account specifically for paying back your loan.

What Is Debt Consolidation?

Debt consolidation lets you combine several loans. The result may be a single loan with a lower interest rate. However, what they offer you might make the repayments last even longer.

Poor credit can harm your chances of getting a fair consolidation loan. Look at the consolidated offer in-depth and see if it genuinely works out better for you.

Does Negotiation Work?

In some cases, talking to your lender(s) can help you get better repayment terms. For example, they may be more flexible with deadlines to fit your payment schedule. Alternatively, they might adjust your interest rates to suit your situation.

Your lender(s) could also offer the following:

• Deferment: Postponing your loan installments for a set period of time.
• Forbearance: Another postponement, but one that still earns interest.
• Restructuring: Modifying repayment terms to be more manageable.

Explain your situation as openly and honestly as you can. However, the outcome here is entirely up to your lender’s generosity.

What To Do When You Fall Behind

As payments pile up, you’ll feel more stress. If a repayment deadline passes, you might worry if you’ll ever get back on track. Here’s how to stay afloat when you fall behind on a loan:

• Hardship programs: Contact your lender and ask about their hardship programs. If you have credit card debts, you could talk to your bank instead.
• Renegotiate terms: You may also consider restructuring or deferring the loan. This will give you more breathing room to get back on your feet.
• Report unfair practices: If a creditor is harassing or threatening you, they’re breaking the FDCPA. Report this to the FTC or the state attorney general.
• Avoid extra debt: You may see another loan as a way around your current debts. Try to avoid this; it only prolongs an already vicious cycle.
• Get credit counseling: Credit counselors give you free or low-cost help managing your debts. Their advice can help you identify blind spots in your budget.
• Celebrate wins: If you hit a milestone in your repayments, acknowledge this. You’ll need these wins to motivate you to get back on track.
• Rebuild your emergency fund: Work to get your financial cushion back. Make sure you have enough to rely on if your situation worsens.

Conclusion

Your loan repayments will almost always be a source of stress. However, the right approach will help you easily manage each installment. Even if you fall behind, there are still ways to get your schedule back together.