How to Pay Back a Loan

There are many people who wind up taking out loans at one point or another. Perhaps they needed the funds to invest in their education, pay bills, cover a sudden emergency, etc. However, regardless of the reason, the ultimate reality is that borrowed funds must be paid back. Unfortunately, there are countless individuals who struggle with paying back loans which they took out. This ultimately doesn't bode well, seeing as interest rates can be astronomical and quickly pile up with the passing of time. Therefore, people who are struggling with paying their back loans should adhere to the following steps.

Make Payments

Although this step sounds obscenely obvious, it's one that many individuals fail to truly follow through on. So often, people get caught up in other financial demands, thus putting off loan payments. In even more unfortunate circumstances, some borrowers are unable to pay off their loans and simultaneously cover their everyday living expenses. Both scenarios almost always engender higher interest fees, and in some cases, total financial ruin. According to OneMain Financial , some of the best ways to pay back loans are on a biweekly basis and via extra income. Extra income could be bonus/pay raises at work or even money which is gifted as a birthday or holiday present. No matter what, finding a way to put money towards borrowed funds is absolutely critical. Depending on the terms and conditions of the loan, certain lenders may be well within their rights to sue if their money isn't returned to them within a certain time period.

Communicate

Paying back a loan doesn't always happen on time. That's a normal occurrence and lenders understand that situations can change. It's very important to communicate with the lender when this happens, as most lenders are happy to make accommodations to the repayment schedule. An unexpected NSF, on the other hand, can lead to costly fees and penalties -- not only from the lender, but also the bank. Typical bank NSF fees from the Big 5 banks are in the range of $40-50 per occurrence, on top of penalties from the lender and overdue interest. Talking to the lender and getting the payment rescheduled, or possibly broken up into instalments, can save you a substantial amount of money in addition to making it easier to repay the debt over a longer period of time.

Increase Revenue Streams

Individuals who find themselves struggling to pay the bills and also pay back their loans should look for ways to increase their income. Thankfully, this is relatively easy in 2018; the freelance market and gig economy are absolutely full of opportunities for people who know where to look. Sites like Fiverr and Upwork are free, thus allowing people to create profiles and market skills which potential clients are in need of. Some of the most popular and well-sold skills on the aforementioned platforms include writing, video editing, website design, etc. Additional opportunities in the gig economy include driving for rideshare services such as Lyft and/or Uber or even renting out rooms on Airbnb. Each of the preceding options should be strongly pursued, especially if someone finds themselves struggling to comfortably pay back money they have borrowed from a financial institution.

While the process of paying back a loan may feel inconvenient at the same, the long-term benefits truly do pay off. Debt is like a proverbial cloud looming over one's head. Getting rid of that cloud truly makes a difference and allows the borrower to not only avoid interest fees, but also put their money in savings, towards bills, or even towards investments.