Coping With Loans/Debt
It is important to understand the consequences of not paying back your loan. First, you will get charged interest on any unpaid balance. Second, you may be charged late fees for missed payments. Third, if you default on your loan, it may negatively impact your credit score and affect your ability to take out other loans in the future.
Considering loans can be used for large purchases that would take years to save up enough money for, the best thing borrowers can do is take their budget and make a realistic plan to start chipping away at the principal balance. One way to make this happen is by using tools like an amortization table, which shows what each loan payment is allocated towards - whether it be paying off interest or principal.
Loan payments are either paid in full or in installments, which are scheduled payments to pay off the loan over a fixed time period. This is usually done with monthly installments. The amount of money put into each installment is determined by the interest rate of the loan and the duration of the loan term.
According to a recent survey, over 75% of Americans have a monthly mortgage or lease payment. The average monthly payment is $1,500 for a home mortgage and $470 for a car lease. The monthly costs for both housing and transportation often represent the largest household expense in America.
But what happens when the monthly payment becomes too expensive? Loan repayment plans are one option to help reduce the debt burden for borrowers.