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What is loan repayment?

Financial planning, saving and budgeting are all part of managing loan repayments.

Care must be taken with your personal finances so you stay on top of your loan and don't damage your credit score.

Follow these 6 steps to make managing your loan repayments easier.

1. Factor your debt into your budget

Treat your loan like any other bill and account for it in your budget. Make your payments on time to reduce debt and interest charges, and to avoid late penalty fees. By factoring your loan repayments into your budget, you'll never be caught by surprise and short of money when it comes time to pay.

2. Set up a standing instruction

Your loan will be repaid in equated monthly instalments (EMIs). Arranging for your EMIs to come out of your bank account automatically can help ensure all your payments are made on time. 

3. Monitor your bank account

You should always ensure you have sufficient funds or available credit in your account. Going overdrawn without agreeing this with your lender first can affect your credit rating negatively. 

If you're an HSBC customer, you can set up mobile alerts. This way, you can keep track of your transactions, such as credits, debits and your account balance, and be notified when the balance goes above or below a certain threshold.

Some accounts may offer overdraft protection. The HSBC Smart Home loan operates through a dedicated Smart Home account. This comes with an overdraft limit equal to your loan amount. In essence, your Smart Home account serves as your loan account.

Simply deposit your regular savings into the HSBC Smart Home Account. Depending on the savings you put in, you can reduce the amount of interest paid and thereby shorten the duration of your loan. 

4. Repay your loan faster

Did you get a salary increase or have cash left over at the end of the month? Put the extra money towards your loan instead of spending it. You can then either continue paying the same EMI and repay the loan faster or reduce your EMI. 

Depending on the terms of your loan, you may be charged for paying off your debt early. In that case, weigh up the interest you would be saving against the early payment charges and see which option will save you the most money. According to Reserve Bank of India guidelines, there are no charges for prepayment or foreclosure of floating rate home loans. 

If you have an HSBC Personal Loan, after 12 months you can partially prepay up to 20% of the original loan amount per year, across two transactions. Any payment would attract prepayment charge as per your loan agreement. 

5. Download your banking app

Online banking and mobile banking apps are a great way to stay on top of your bank account activity, no matter where you are. 

If you're an HSBC customer, you can download the HSBC India Mobile Banking app to check your balance and track payments on the go. You can even use the Loan on Phone feature to pay off multiple credit card transactions with one installment plan. Device restrictions apply. This feature is only available for credit cardholders and not personal loan customers.

6. Talk to your lender if you're unable to make your repayments

If you're finding it difficult to manage your finances and personal debt, contact your lender as soon as possible. They'll be able to work with you to help you find a suitable solution. The further you fall behind, the more difficult it will be to get back on track.

If you miss a payment, or you're late in making a payment, you'll usually be charged a fee. This will also be reported to credit reference agencies, which may make it more difficult for you to borrow in the future. Seek independent advice if you think you'll need help long term.

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