Low rates and the timid return of confidence may encourage you to take out consumer credit. Whether to finance a new car, work in your home or finance the education of your children.
Advised by your bank or broker, you may then decide to take out a loan and you agree to repay it. But this request is not trivial (although it sometimes seems so). Framed by law to avoid over-indebtedness, you will theoretically not be able to go into debt in a risky way, if you show total transparency on your income and your charges.
However, to avoid unpleasant surprises and ensure that you can repay your installments, you will have to learn how to manage your credit over its entire lifetime. Like an airline pilot preparing his flight plan and to ensure that you leave and arrive without incident, you will need to plan your trajectory.
Step 1 – The flight plan
The first step is to prepare your flight plan. For this you must build your budget forecast over the life of your loan.
First identify all of your income (the most certain): your salary, your rental income, etc., for the sake of security, avoid taking your possible premiums into account. This is your basis for paying all of your expenses.
Then identify all of your expenses. This exercise is more complex because you will have to identify the recurrent charges (rents, credits in progress, food, etc.) and exceptional charges (holidays, taxes and duties, Christmas and birthday gifts, medical expenses, etc.).
To help you carry out this flight plan, rely on your account statements. They track all your income and expenses and the banks have taken the initiative to categorize them (wages, housing, health, transport, leisure, animals, daily life, etc.).
By using these services you will have the assurance of not forgetting anything.
When you have completed this somewhat laborious exercise, you will know exactly what your monthly balance is (what you have left to spend). This constitutes your ability to repay a loan. So make sure that the monthly repayment amount of your loan does not exceed this balance.
Once you are sure of the viability of your flight plan, you can knowingly subscribe to your loan.
Step 2 – Takeoff
The subscription is a crucial step. Make sure you find all the elements that you had anticipated. For that, check of course the amount which is granted to you, but also that the monthly payments which you are asked are consistent with your forecasts. Otherwise, contact your credit institution immediately.
You will often be offered to take out insurance. This is not compulsory but recommended. Measure the benefits and costs carefully before rushing your decision.
Stage 3 – The cruise flight
During this phase, you will have to check that your forecasts are realized and that they correspond to reality. It is ideally a monthly exercise, and at least a quarterly exercise.
To do this, you will need to know the date and the amount of the monthly payment of your loan.
A few days before the deadline, take the time to consult your bank account or your aggregator, you will then have an overview of your ability or not to meet this deadline. Your banking sites also allow you to consult the “operations to come”. Do not hesitate to consult them to ensure a serene flight.
Likewise, before embarking on an exceptional expenditure, check that this expenditure will not put your next direct debit at risk.
Step 4 – The unexpected storm
Life and its surprises may lead you to change your flight plan. Some expenses may be as unpredictable as necessary. You will then find that you will be unable to repay the next installment of your loan. Then adopt the same attitude as an airline pilot in front of a thunderstorm. Contact air traffic to request a diversion.
Above all, do not adopt the attitude of ignoring and rushing into the cloud. The pilots will confirm it! You will then have a “payment incident”, numerous unpaid fees, reminders, etc. This situation will degrade your relationship with your banking establishment and your next loans will be made with higher rates because you will be identified as having had a “Incident”.
In your case, this will involve contacting the bank or credit institution to inform them of your diversion need. Indeed, these organizations do not know your exceptional situation and cannot guess it and in fact help you.
These organizations will then offer you to postpone one or more installments or to smooth the loan over a longer period with lower monthly payments if the storm spreads. You will then remain a “good” customer who knows how to manage his budget. You may even be able to renegotiate your loan on this occasion or have it repurchased by another organization if you are in a period of falling rates. You will then transform a difficulty into an opportunity.
If you have several credits and are unable to find an arrangement with your credit organization, you can then contact one of the many credit purchase agencies. On mindfinance website, you will soon find a list of reliable partners in your region. These organizations will offer to group all of your credits into one over a single period. The amount of your monthly payments will drop in favor of a longer loan term. But this operation has a cost and the broker who will offer it to you must inform you of the additional cost generated by this grouping of credits. On this occasion, you will have to recalculate your provisional budget to be able to manage your single deadline again and minimize the risk of a thunderstorm.
Step 5 – Landing
One of the essential tips in managing a consumer credit is to plan a landing. A pilot who would spend his life in the cabin would become exhausted and make his flight too risky. Like him, plan to repay your loan in full and get out of debt on a specific date.
The credits must allow you to access a particular project or to satisfy a crush, but not to live continuously on credit.
In addition, you will have come yourself that you are able to take out a loan, manage your budget over a long period and repay a loan. This will only confirm your ability to manage your deadlines well. You will be reassured and so will your bank. It will be all the more accommodating to lend you again.