How to Keep on Top of Your Personal Loan Repayments.

Personal loans usually help you buy something that's not a house and something bigger than you can put on a credit card.

Whatever you have one for, when times are tough, keeping up with your repayments is essential. If you are finding it difficult to meet repayments on your personal loan, there are several things you can consider.

Talk to your lender

The first thing you can do to help reduce and manage your repayments is to talk to the lender, the company that has provided you with the loan. This is especially important if you are behind in your repayments. One of the things that your lender can do is extend the period of time that you have to repay the loan, thus reducing the amount you have to pay. In the long term, you will end up paying more for the loan in interest but if that stops you from defaulting on the loan then it is worth it.

Refinancing to reduce interest

If you decide to refinance you personal loan you will need to consider the exit fees that will be incurred when you change to a new provider. Check that this exit fee will not outweigh any benefits from reducing your repayments at a lower interest rate. If in doubt, speak to your accountant.

Loan consolidation

If you have more than one personal loan, or perhaps you also have a home loan you can consolidate these loan amounts into one. Again you will need to consider exit fees and charges for doing this but sometimes having one loan is easier to manage than several, all with competing fees and interest rates.

However, as with extending the time period of a personal loan, you will end up paying more in the long term. If you had a $250,000 home loan for 25 years and you decided to consolidate your $20,000 personal loan into the single debt, you will now be repaying that $20,000 over 25 years, not the 5 years of a personal loan. The interest rate on a home loan may be lower, but you will pay more interest over the additional 20 years you have added to the life of the loan. Again, if this stops you defaulting on the loan and incurring a remark on your credit history, then this is an action you have to take. Just be aware of this and when times are better again and you have a greater cash flow, try to pay more off the loan in a shorter period.

The key to managing your personal debt in difficult financial times is to seek help early. Don't just think the situation will improve if you wait. Take action as soon are you realise there is a potential problem, this way you have more chance of remaining in control of the situation and getting the help that you need.