There are a hundred different kinds of loans. No two are exactly alike, but when it comes to making a loan payment there are some Dos and Don’ts that will always apply.
The loan payment process is set up by the lender. This means it has been structured to benefit the lender, and make sure they get as much of your money as they can. You should have a strategy when it comes to your loan, so you can pay it off and be done with it as quickly and easily (and cheaply) as possible.
Before You Borrow
DO
Read the fine print. That’s where they hide the stuff they don’t want you to see.
DON’T
Borrow from a lender that has prepayment penalties. These will prevent you from paying down the loan early. In essence, it keeps you locked into the exact loan payment plan they want, and you will have no choice.
DO
Ask every question you can think of. You will find lenders are a lot more accommodating when they want your business rather then after they already have it.
DON’T
Accept anything less than locked in fixed rates. Variable rates always go up but they never go down, so never agree to a variable APR loan.
Through the life of the loan:
DO
Pay more than you have to. Even if it is 5% or 10% pay every extra dollar you can. If you happen to come into some extra money, make an additional loan payment entirely!
DON’T
Miss any payments. This sounds like a no-brainer, but it is easy for many people to think “well it’s just one payment I’ll make it up next month.” Every missed payment works against you, and tacks on more time and interest. In some cases a missed loan payment will also cost you fees or penalties.
DO
Make sure you have reliable contact information for your lender. This means more than simply having an email address, you should have a phone number, a name, or some kind of contact you can rely on for answers or help.
Remember, the longer you have money borrowed, the more you are going to pay in interest. No kind of flashy math or attractive offers can ever change the simple basic truth that lenders want your loan to last as long as possible, so you will pay more interest.
DO
Make every loan payment as big as you can afford, and
DON’T
Make payments for longer than you have to