Loan and Debt Repayment

Most individuals have at least one form of debt, ranging from credit cards to auto and student loans. Loan repayment planning begins with estimating your future salary and expenses to ensure that you have the ability to repay your debts regularly, protect your credit and put money away for your future. Your borrowing levels should always support your personal finance “Life Plan” goals.

Below are tips for repaying loans:

  • Understand loan terminologies such as deferment, forbearance, default, loan servicer, repayment terms, and grace period. We review these terms and more in our Navigating Loan Repayment & Understanding Real World Finance Money Talk.
  • Calculate your monthly payments using a loan calculator.
  • If possible, make prepayments on loans to minimize the interest you pay over the life of the loan. When shopping for loans, find a new lender if your lender charges fees and penalties for prepayment.
  • Protect your credit. If you cannot pay your loans, or any creditor, proactively contact them and ask about your options for deferment, forbearance, refinancing, or changing your repayment plan. Do not wait until you receive a collections notice, for it will already be on your credit report by then!
  • Learn about the different repayment options before you choose to move forward with any.
  • Industry standards recommend that students not borrow more student loans than one year of their expected annual salary upon the start of their career.
  • Pay yourself first by putting money into your retirement account before paying your living expenses. Do not wait until you are debt-free to start saving. See the Saving and Investing section of this site for more details.

More resources on loan and debt repayment: