How to create a loan repayment plan

There will likely come a time in your life when you need to borrow money to achieve your goals, whether it’s buying a home, planning a life event, or starting a business. While being able to borrow from a variety of lenders is helpful and means you can get ahead, you also need to be sure you can repay your loan so your credit score doesn’t suffer and you can avoid financial trouble. Whether you choose payday lenders that require payment within a month or personal lenders that can take up to a year, it’s important to have a plan in place to help you stay on track with your repayments. Read on to learn more about creating a loan repayment plan that fits your needs.

Why is creating a plan so important?

If you’re taking out a loan for any reason, whether it’s a personal loan for home repairs, a car finance loan, or a short-term loan, creating a repayment plan is important. The sooner you pay off your debt, the better, and putting together a plan that works for your budget means you can stay on the path to paying off your loan and becoming debt free. Repayment plans are especially important for those who have had trouble repaying loans in the past and may have bad credit as a result. Using a repayment plan to keep you accountable for repayments means you can improve your credit score and reduce the chance of falling into financial trouble later on.

Determine your budget

This is one of the first and most important steps to take when it comes to creating a debt settlement plan. Review your bank statements to learn more about how much you’re putting in each month and how much you’re leaving in terms of withdrawals. Categorize your payments, making sure your non-negotiable, priority payments are paid first. Then try to figure out if you’re spending too much in other areas that you can cut back on and use to make your monthly payments. Paying off your debt is also a primary expense, so cutting back on unnecessary expenses means increasing cash flow to help you pay the repayments no matter what.

Calculate repayments

Look at your loan term and requirements and, using your budget, determine how much you can afford to pay off your loan each month. Once you remove your non-negotiable payments from your budget, such as rent or mortgage, car finance and other major bills, some of the remaining amount should go towards your debt. You can use an online calculator to help you figure out how much you’ll need to pay each month to pay off the debt by the agreed-upon deadline. If you have extra money left over each month, you may want to consider paying more than required so you can get out of debt faster.


Fortunately, automation ensures that all repayments are made on time and in full, so you don’t have to think about it. It’s easy to see why some people skip paying off debt if life gets in the way and it just slips their minds. But with automation, you can set up a payment that leaves your bank on the same day every month to pay off your outstanding debt; you don’t even have to think about it. This saves time and stress and means your debt will be paid off before you know it.

Review your plan

Your plan may last more than a few months, or even more than a year for long-term loans, so it’s important to review your plan regularly to make sure you’re on track, for example, if you get a raise, you may be able to adjust your repayment plan to pay more in rebates each month. If you become unemployed or unable to work, you will also need to adjust your plan accordingly.

Creating a repayment plan means you can keep track of your debt repayments and make sure your credit score stays healthy while working to stay out of debt.

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