Good planning is the key to paying off your loan without stress. Here's how to build a repayment plan you can stick to.
Why planning matters
Missed payments cost money: lenders can charge default fees and collection costs, and late payments are reported to the credit bureaus.
Step 1: Get an overview of your finances
Make a monthly budget
- Income: take-home pay after tax, UIF and other deductions
- Fixed costs: rent or bond, transport, school fees, insurance, cellphone
- Living costs: groceries, electricity and water
- Debt: store cards, credit cards and other instalments
Step 2: Choose a repayment strategy
- Pay extra when you can: the NCA lets you settle early, and extra payments reduce interest
- Snowball method: pay off the smallest debt first for momentum
- Avalanche method: pay off the debt with the highest interest first to save the most
Step 3: Set up a debit order on payday
Set your debit order for the day after your salary is paid – e.g. the 26th if you're paid on the 25th – to avoid returned debit order fees.
Step 4: Build an emergency fund
Aim for at least one month's expenses in savings, so a car repair or medical bill doesn't make you miss a payment.
Step 5: Use bonuses and tax refunds wisely
Extra money? Pay down debt
A 13th cheque, a bonus or a SARS tax refund is a great chance to make an extra payment on your most expensive debt.
Step 6: Review your plan regularly
If your loan has a variable rate, your instalment changes when the repo rate moves. Use our loan calculator to see how amount and term affect your instalment.
Warning signs – get help early
- You're using one loan to pay off another
- You regularly have returned debit orders
- More than half your income goes to debt repayments
Contact your lender as soon as possible. If you're over-indebted, an NCR-registered debt counsellor can help you through debt review.
Conclusion
With a budget, a debit order on payday and a small emergency fund, you'll stay in control. And if you need a new loan, Lendova helps you find the best terms.