How do you manage a personal loan once the money is deposited into your account? Read our tips on managing your personal loan payments.

Sourced from: www.nerdwallet.com

Typically, taking out a personal loan is pretty straightforward.  Lenders offer online applications and even same-day funding in many cases.  Once you get that big chunk of money, though, what’s the best way to handle it?  Check out these five ways to make your personal loan payments easier, smarter, and more effective:

1. Make a budget

Before you apply for your personal loan, take a close look at exactly what your monthly expenses will be (including the new loan payment) and how much you’ll have leftover.  Even if you plan to consolidate all of your debt into one payment, make sure that the one loan payment is still within your monthly budget so that you don’t end up having to take on more debt.

2. Decide where to put the money

Keeping the money from your personal loan in your checking account will mean that it’s more accessible, making it easier to pay bills.  That said, if it’s too tempting to spend it if it’s mixed in with the rest of your assets, consider keeping it in a separate checking account.  Brokerage and high-yield savings accounts are another option, but these are harder to withdraw from and don’t typically make enough interest to cover your loan’s interest rate.  The decision of where to keep your money comes down to your own comfort level as well as your financial discipline.

3. Automate and simplify your payments

There are multiple benefits of signing up for automatic payments, including potential rate discounts and ensuring you avoid missed payments.  This can help you save on late fees and takes the effort out of paying your monthly bills.  Another option for simplifying your payments is to consolidate all of your debts together into one monthly payment.  This option only makes sense if the interest rate is lower than the combined rates of your existing debts.

4. Keep an eye on opportunities to refinance

Although unsecured personal loans tend to have short terms, occasionally it is possible to see some benefit from refinancing.  If interest rates have gone down, or if your credit score has gone up, you may be able to secure a better interest rate or monthly payment.

5. Check your prepayment options

Make sure you know if your loan has any prepayment penalties.  It can be tempting to pay off your loan quickly as you near the end, but it may not be worth it if you will incur extra fees.  Compare how much  more interest you would have to pay over the remainder of the loan with how much the prepayment penalty is to determine if it’s worth it or not.