manage loans

Smart Ways to Manage Long-term Loans Better

Ailsa Adam February 13, 2021

“I wish repaying loans could be as easier as borrowing money.” it is what many people say when they have a hard time to pay off the loan. Small loans require a lump sum repayment, but long-term installment loans require you to pay down the debt in fixed monthly instalments. It does not seem t be a burden to make payments in instalments. 

However, it involves a certain degree of risk of falling behind the repayments due to unexpected events. If you take on a debt that will last for at least five years, you will always fear payments if you lose your job or your financial situation does not remain as more robust as it is now. Long-term loans outweigh drawbacks of short-term loans. 

For example, you can boost your credit score, and you will not have the burden of paying off the debt in a lump sum, but many people are struggling to manage long-term loans in a better way. Here is how you can do it.

Figure out where you stand

You cannot fix a problem unless you know what it is. You should take stock of your current financial situation. It will help you analyse where your money is going and why it is challenging to keep up with all repayments. Of course, you will have small loans like credit card bills and payday loans along with a car loan or a mortgage. 

Create a list of all your debts, including your overdrafts and store card debts and then compare it with your earnings. It will let you know precisely how much cash is going toward debt payments. You will have to create a household budget and whittle down spending. Throw money that you save by cutting back on your expenses at debt payments. 

Set aside instalment money as you receive your paycheque of Loans

When the due date comes, you find that your account is short of cash. It is what makes you flustered. If you do not pay on time, your credit score will go down, and you will attract late payment fees. 

If this scenario continues to exist, you will end up losing your house or car. No doubt you will be making arrangements by cutting down on your spending, but it may not be enough to manage debt payments. 

  • You should link your payment account to another account to transfer the instalment money there. By doing so, you will spend days calm and make the payment instantly when the due date falls. 
  • If you have opted for an auto-debit mode, make sure that your payment account has money to pay down instalment and transfer the rest money to another account for your household expenses. It will prevent you from dipping into funds you have set aside for your loan payments. 

Throw windfall/side gig money/bonus toward debt

If you get a windfall or receive bonus or income from your side gig or any other unexpected cash, you should utilise it to pay your long-term loans. You will likely use it to buy you something, but you should set aside for debt payments to err on the side of the caution. 

This money will help you stay afloat when you lose your job or come up with a medical emergency. It is crucial to take care of your every penny unless you settle the whole of your debt. Since long-term loans are usually secured, you can lose your collateral if you make defaults continuously. 

Avoid taking out small loans

When you have taken on long-term loans like car loans or a mortgage, you should avoid taking out small loans – be it bad credit loans or payday loans. A rule of thumb says that you should manage your funds carefully, so you do not fall short of cash in unexpected expenditure. 

If you have an emergency corpus, you will not need to chase online lenders to borrow money for your small needs. Although short-term loans do not feel like a burden, it can be hard to manage long-term loans along with them. Since your income is not growing and you are to pay more than the borrowing amount, you should calculate your affordability at least once. 


Refinancing allows you to get a new loan deal at lower interest rates. This method is commonly prevalent in mortgages. After the end of the fixed interest rate period, the lender puts you on a standard variable interest rate. It is the best time to refinance your loan so you could get a new loan at more affordable interest rates. 

Managing long-term loans is no picnic, but you can do it if you carefully assess your income and spending behaviour. Never take out a loan if you think that you will not be able to afford it to repay. 

Leave a comment

Your email address will not be published. Required fields are marked *

Apply Now