Budgeting for an instalment loan can be a bit more tricky than budgeting for a pay day loan. When you budget for a pay day loan you only need to think about the next two months. You need to think if you can afford the repayment in the first month and then ensure you can afford to cover all your expenses the following month to make sure that you do not have to reapply for a second pay day loan. This can be quite easy as you know what is coming up in the next month.
When budgeting for an instalment loan, you need to budget for the whole loan duration. This could be anything up to 12 months. Create a budget for all the essential items and household bills. You then need to think about what might be coming up in the next 12 months. If you have a car, chances are there will be car tax, servicing and MOT’s. If you pay your bills quarterly, this bill could pop up four times in the year. Birthday’s and Christmas may come up during the loan duration. Write a list of what you think will come up in the next 12 months and work out roughly how much you think you will need to spend over the time period.
Once you have this information, divide the total amount over the loan duration. You then need to ensure you have this much each month to cover those bills. It can be tough as if you had money to save you probably would not be taking out an instalment loan. However it is important to remember every payment needs to be made on time every month. Although most loan companies will help you if you are struggling financially, advising them that you can not pay as Christmas is coming is not a good enough excuse. Failure to make the payment can have a negative effect on your credit file and can even result in legal action.
If you do not feel that you can make every payment then you should not consider taking out an instalment loan as you may find yourself in financial difficulty.