Starting from pre-qualification of the loan to getting the funds, obtaining a personal loan in UAE is usually quite an easy process these days. This is because the lenders these days offer user-friendly online applications and quick funding.
Maintaining the payments on your personal loan may seem to be unclear sometimes. You may have doubts such as- What would happen if I end up missing a payment? What impact would the payments have on my budget?
Personal loan Dubai is just like any other form of debt. You need to have an understanding of how the repayments every month will affect your budget and have a clear plan for paying off the loan.
Here is a list of things you can practice for making the payments of your personal loan simpler and more convenient.
- Having a Budget
The first and the most important measure for making proper loan payments every month is being aware of what you will have left after making them. Ideally, you should be doing this before applying for the loan.
However, considering the worst possible case, you might have obtained a loan without having a clear picture of its impact on your monthly expenditure. In this case, you would require more debt for making up for it.
Even when you are taking a loan for credit card consolidation, the sole reason for such a loan is that you have to make only one single payment. It will still be sensible to gauge the effect on your financial budget.
These days mobile apps for budgeting and saving tools have become quite popular. However, some people prefer to record everything on a spreadsheet or some other system for tracking their spending.
It is recommended that you make a simple budget plan wherein you spend half of your income on necessities, not more than 30% on the things you wish to have, and the remaining 20% on the repayment of debts and your savings.
Some budgeting apps will help you in paying bills, while the other will allow you to enter the amount you want to spend on various things and alert you as soon as it looks like you are touching the limit.
- Go Through the Fine Print Thoroughly
Whenever you reach closer to the final installment, it can become tempting to take your payments into high-gear and make the payment of the loan quickly. However, it is recommended that you compare the amount you will be saving by clearing it off early to the potential benefits it can do elsewhere.
Ask yourself that in case you have the money to and the capability of paying off your loan early would you be able to leverage the dirhams you save for increasing your standard of living or your revenue at some other tangent instead of the loan.
You must also look for penalties on prepayment that are fees, which some lenders charge once you pay your loan early. In case your loan comes along with fees, consider if the amount of interest you will accrue by waiting for the loan term to end is higher as opposed to the amount your prepayment fees will cost.
- Look for the Chances to Refinance
In case you have set up the option of automatic payments, and are sure that you have been offered the lowest possible personal loan interest rate in UAE, there are still chances that you will find a good opportunity for refinancing.
Due to the short tenure of unsecured loans, there are very few people who think about refinancing them. However, there are cases where it is beneficial.
For instance, if the rates of interest drop, your loan amount can get a higher APR as compared to the current rates in the market.
Similarly, if you have been making timely payments on your loan for some time now and your credit score has become better, you may get a lower rate on your loan.
Being prudent has its advantages. Moreover, it is sensible to reduce your rate of interest or payment.
- Make your Payments Easy
There are plenty of lenders who offer a discount on rates to those borrowers who have set up automatic payments that can cause a drop in your monthly payments by some dirhams every month.
Moreover, the facility of automatic payments helps you in avoiding missing your payments, which usually results in late payment fees and makes the payment an effortless part of clearing off your bills every month.
The other way of simplifying your repayments after a few months with the current personal loan in UAE is rolling multiple debt sources together with debt consolidation or a balance transfer credit card. By consolidation, you can put all your debts together in a single monthly payment at one rate of interest.
Consolidation is sensible only if you get a rate of interest that is lower than the combined rates on the existing debts. It is also best for people with a good credit score who have a debt-income ratio below 40%.
- Deciding the Allotment of Money
Unless you plan to send the funds directly to the credit card providers or consolidate debts, the best option would be to keep your money in a checking account for having easy and quick access to it.
It is harder to withdraw funds from a brokerage or a high-yielding savings account. Moreover, there are very low chances that the interest you have earned on any of these accounts would be worth it.
Whether or not to keep the funds in a separate account is based on how simply you can mentally divide up the balance between the amount you can spend and the amount you cannot.
However, it is mostly psychological. For some of the people, it is more convenient to see huge payments come out of an account they do not even use to purchase groceries. In the end, it all comes down to preference and your own discipline.
With these simple tips, you can easily manage your personal loan repayments while not causing harm to your regular expenses.