Do you have a big idea you’re ready to bring to life, but you’re a bit stumped by loan repayments and how you’ll need to repay the loan? We get it, finance can be overwhelming, but knowing how repayments work, how much they’ll be, and how frequently you’ll need to make repayments can help you find the right personal loan for you.
Every lender does things a little differently, but what they have in common are the core elements of a repayment:
- Principal - the sum of money borrowed
- Interest - the annual rate quoted in your loan contract
- Fees - this can include, but is not limited to, upfront and monthly fees
These can be broken into weekly, fortnightly and monthly repayments. The specific schedule will depend on your lender, though some will allow you to choose the frequency.
Direct bank debit
A common way to make a personal loan repayment is via a regular direct debit from your chosen bank account.
You will be required to authorise direct debit repayments as a part of the application or loan acceptance process, so don’t worry, lenders can’t make direct debits from your account without your permission. The advantage of direct debits is that you don’t have to manually make a repayment. You simply need to make sure there are sufficient funds in your account on the direct debit date to avoid late or missed repayment fees.
Manual bank transfers
Some lenders may provide you with the option to make manual repayments rather than direct debits. This can offer you a bit more freedom, however, you’ll need to be very diligent about making the repayments on or before the due date if you wish to avoid additional interest or late payment fees.
Thinking of making some additional repayments down the track? If you’ve got the spare cash, additional repayments can be a great way to help you get ahead or pay off your loan earlier.
By paying off your loan earlier, you can reduce the amount of interest you’ll pay overall. However, some lenders will charge early exit fees to make up for the interest they lose out on when you repay your loan early. If you’re thinking you’ll want to make additional repayments, make sure to choose a lender who won’t penalise you for your hard work. This is where a little bit of extra research can really pay off.
Many lenders have online facilities that enable you to make additional repayments where you can specify the amount you’d like to repay and how you’d like to make the payment, whether that’s BPAY or direct bank transfer.
Online or over the phone?
Some lenders may offer the option to make repayments over the phone, but with more and more lenders favouring an online application and customer experience these days, you’ll probably make and keep track of your repayments online.
If you’re borrowing from a traditional bank, you may be able to make repayments at your local branch. However, you may be charged a processing fee for this service.