Personal loan

How to avoid falling behind on your personal loan payments

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Getting into debt in a strategic and thoughtful way can help us achieve certain goals and even improve our credit ratings. This is especially true for personal loans, which are typically used to finance major expenses, such as a home improvement project, wedding, funeral, or even moving to a new city.

But there is always a risk that our situation will change and that we can no longer afford to repay our loan, or that we will just start to fall behind on our monthly payments.

Before incurring any form of additional debt, it is important to have a plan in place for how you will pay off what you owe. So if you’re planning to apply for a personal loan in the near future (or have recently taken out a loan), consider these steps to protect yourself against potential late payments.

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Sign up for automatic payment

One of the easiest ways to avoid falling behind on loan repayments is to put your bills on automatic payment. Autopay allows payments to be automatically deducted from your linked bank account and applied to your bill. This way, you don’t have to remember to manually transfer money to pay your bill each month.

Autopay can be especially useful when life gets busy and you might accidentally forget to pay your bill for a month. Additionally, many personal lenders actually offer you a reduced APR for using autopay to make your payments. SoFi, LightStream and Marcus of Goldman Sachs all offer a 0.25% APR rate reduction for using autopay. Even though 0.25% doesn’t seem like a lot, the money you save can really add up over the life of your loan.

SoFi Personal Loans

  • Annual Percentage Rate (APR)

    5.74% to 21.28% when you sign up for autopay

  • Purpose of the loan

    Debt consolidation/refinance, home improvement, relocation assistance or medical expenses

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

LightStream Personal Loans

  • Annual Percentage Rate (APR)

    3.49% to 19.99%* when you sign up for autopay

  • Purpose of the loan

    Debt consolidation, renovation, car financing, medical expenses, marriage and more

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

Apply to a lender that lets you choose your payment due date

Before choosing a lender, you might consider whether the payment due date flexibility is something that is important to you. This would allow you to choose a day of the month that more closely coincides with when you expect to be paid so that you don’t risk not having enough money to cover your loan repayment.

However, it is important to note that few personal lenders have this much flexibility. The Marcus by Goldman Sachs Personal loan provides this option, however. You will need to choose your desired due date when you accept the loan and if you ultimately decide you need to change your due date for more flexibility, you can do so again up to two times.

For your information, a loan from this lender also rewards you for always making your payments on time; you can earn a month that you don’t have to make a payment (and won’t accrue interest) after making 12 consecutive payments on time. It can be a helpful respite if your situation changes and you need time to regroup.

Marcus by Goldman Sachs Personal Loans

  • Annual Percentage Rate (APR)

    6.99% to 19.99% APR when you sign up for autopay

  • Purpose of the loan

    Debt consolidation, home improvement, wedding, moving and moving or vacation

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

Avoid asking for more money than you actually need

Before submitting your loan application, you should carefully review how much money you will need to borrow. For example, if you’re taking out a loan to pay for a home improvement, gather all of your material and labor estimates before applying for a loan, otherwise you’re just taking pictures in the dark to figure out how much money you need to borrow.

The more money you need to borrow, the higher your monthly payments will be and the more interest you will have to pay. A high monthly payment may give you less wiggle room in your budget. And while you can sometimes opt for a longer repayment term, a longer term means paying more interest over the life of the loan.

If you need help determining the right amount of money to borrow, you can talk to a financial advisor who can help you find a way to fund at least some of your expenses in other ways so that you can borrow as little money as possible.

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Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.