Four Tips to Help You Manage Long Term Personal Loans

Manage Long Term Personal Loans

A personal loan can provide tremendous relief when facing burdens such as unexpected medical expenses, a job loss, a divorce, or any number of circumstances. If your loan application is successful, you may find yourself finally able to exhale after a long period of stress and worry.

Whether it’s a short term loan, unsecured loan, installment loan, business loan, or any other kind of loan, getting this kind of financial help can be a huge relief.

However, that “exhale” should also be a turning point, one where you immediately begin to put a plan in place to pay the loan back. The management of a personal loan requires commitment from the borrower, and no one else is going to do this work for you.

Unfortunately, those who fail to properly manage personal loans, especially a long term personal loan, end up facing negative consequences.

A bad credit score, an inability to secure additional loans, and possibly the loss of assets as you figure out a plan for repayment can be difficult to handle.

The last thing you want as a result of a personal loan is an even worse financial situation. We have the tips you need to successfully manage a long term personal loan and regain your financial footing once and for all.

Start with a Budget

Many people find themselves in financial distress because they do not have a budget. This is the easiest way to get into credit card debt or other financial woes is to spend more than you make.

It’s important to keep tabs on the money coming in and out of your bank account, especially if you’re also managing student loans, credit cards, or other forms of loan repayment.

Sit down and write out all of your expenses, including an estimate for those you do not know offhand. Your rent, car payments, student loan payments, credit card payments, and utilities should be easy enough to pull from previous bills, and you can use a placeholder amount for food, activities, and entertainment.

Track those items to the penny over the next month, keeping up with what you spend on those categories. You may be shocked to realize your smoothie habit is draining an extra $100 out of your bank account.

This is where you trim the fat to create the funds to cover your long term loan. This can help you make a plan to hit every monthly payment, and build your way back to excellent credit.

Budgeting does not come easy for everyone, and fortunately, there are loads of helpful apps to choose from to keep you on track. Starting a household budget is one of the best things you can do not only to pay back your personal loan but also to stay in better financial shape going forward.

Person Holding with Samsung Galaxy Tab

Pay More Than You Can…On Time

Paying on time, each and every time is the name of the game when it comes to loans if you do not want to damage your credit score. This is why a budget is incredibly important, so you do not find yourself short of money when the bills are due because you overspent.

In an ideal scenario, you will also try to pay extra on the loan whenever possible. Paying early and paying extra will bring you significant benefits, such as

– A shorter loan repayment term overall (meaning less interest paid over time)
– The financial freedom to use that money in other ways once you have paid your debt
– An improved credit score and credit history if lenders report you always paid on time

Paying early is in many cases one of the best things you can do, but we must flag one very important warning here. Some lenders have a penalty for paying off a loan before it is due, and this is the “fine print” you need to review carefully before entering into any loan agreement.

Dane County Credit Union never charges an early pay-off fee, but if your loan is with another lender check out your loan term before you make a repayment plan. It is possible in these scenarios that your hard work to pay extra is completely negated by penalty fees like prepayment penalty. This is where you need to know your loan, inside and out, so you can make the best decisions about when to pay it off in your repayment period.

Even if paying “extra” is problematic, rest assured paying “on time” is never a bad thing. That is something you should live by as a rule set in stone.

Woman Using Drawing Pad


If you are managing multiple loans, a new loan option can come in the form of consolidating them. For many borrowers there comes a point where it seems impossible to pay back all of the debts, and they fail to make the minimum payment on any single loan.

A higher interest rate can catch you off guard, which is why looking at a loan’s annual percentage rate is so important. Debt consolidation offers a way for you to combine the loans into one monthly bill, paying them off at a potentially lower interest rate, or even a fixed rate.

The good news for many borrowers is that it is possible to lock in an interest rate in debt consolidation that is lower than the average interest rate on your loans. The “bad news” is that you will lose out on a longer repayment term, and have a shorter amount of time to pay back the debt.

If you can revisit your budget and continue to trim some fat to pay the monthly debt consolidation bill, you may find this is the best possible solution for you to get your financial house back in order.

Monitor Your Credit Score

Some consumers only worry about their credit scores when it is time to take out a new loan, perhaps when purchasing their first home or car.  But you should be monitoring this score regularly to ensure that your efforts to pay down your debts are reflected in your score.

By making on-time payments on your personal loans, you should see a positive impact on your credit score. If you miss payments, you can be sure the credit score will go down. A steady and consistently good score is what you want to position yourself for the best possible loans in the future, if and when they are needed.


Personal Loans: Final Thoughts

Managing personal loans requires organization, dedication, and commitment. If you can establish and stick to a budget, it will help you not only pay off the loan but also be in a position to better manage your finances going forward.

Enter into any personal loan agreement with a clear head and a clear plan for paying it back, and be sure you have combed through all of the fine print first to avoid getting hit with fees and penalties you may have missed.


Published by

Jen M.

Jen has been with DCCU since she graduated from UW Madison - a long time ago. As the Content Strategist she helps share all the amazing things DCCU does in our community and spreads the credit union philosophy of People Helping People. When she's not working for the best credit union in south central Wisconsin, she's busy with 4 kids and a feisty little dog at home. She formed her family through adoption and has a deep passion to support foster and adoptive parents and kids. Her favorite place to relax is poolside or in front of the fireplace.