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Repayment Plans

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					REPAYMENT PLANS
Let’s brainstorm!




       What are
      repayment
        plans?
          Defining the term
          ‘Repayment Plan’
Repayment plan refers to the type of
  agreement which
one has to follow when paying back a credit
  facility,
such as a loan or overdraft.

 The choice of a repayment plan will depend on
  various
factors, mainly:
- One’s income

- The amount to be borrowed
What should be considered when
 choosing a repayment plan?
    One should choose a repayment plan which
      fits
    best one’s financial situation.

    Before making the final decision one
      should:
     Define his or her financial goals

     Calculate available funds (now and in
      the future)
     Develop a realistic budget plan

     Determine how much he or she can
                  Activity

   Use the worksheet provided to summarise
information about the different repayment plans
   which will be outlined in this presentation.
Take note of the advantages and disadvantages
           of each repayment plan.
      Types of repayment plans


   Standard repayment
   Extended repayment
   Graduated repayment
   Income-based repayment
         Standard Repayment
In this repayment plan the monthly payment
  amount is
fixed.
  This means that the same minimum payment is
  due each month and will remain so till the end of
  the loan term.

Some features include:
 Maximum repayment period is short

 Results in lowest amount of total interest paid
        Extended Repayment
This plan is similar to the Standard Repayment,
   but
allows a longer loan term.
   The term length will depend on the total
   amount
   borrowed.

Some features include:
 A longer period to pay back the loan

 Reduced size of payments

 Increased total amount repaid over the
       Graduated Repayment

In this repayment plan, the payments start low
  and then
increase in amount in one or more increments
  over time.

Some features include:
 Low repayment amount in the initial months or
  years
 A short maximum repayment period

 Higher cost of interest paid when compared
  to the Standard Repayment plan.
    Income-Based Repayment
This repayment plan is based on a person’s
  income, as
well as the household size.

Some features include:
 Repayment period can be over a long period
  of time (e.g. Up to 40 years)
 A monthly payment amount that is affordable
  for the person’s life situation
 Higher cost of interest paid over the term of
  the loan when compared to some other
To successfully manage
   loan repayment...


   What are the factors
  you should consider and
   the steps you should
          follow?
    To successfully manage loan
     repayment, you should ...
   Define your short- and long-term financial goals
   Know your income and expenses
   Know how much you have to repay and to whom
   Understand the terms and conditions of your
    loan/s
   Select the repayment plan that best achieves
    your goals, given what you can afford to pay
    each month
   Develop an affordable budget plan and estimate
    how much you can afford to pay each month on
                       Coping with
                       repayments

Read and discuss the following case
 study
      Maria and Patrick have been paying their home
    loan for eight years. They also have a 3-year-old
    son who has just started attending a private
    school. Patrick is about to loose his job and due to
    this they will no longer be able to meet their
    monthly home loan repayments. What are their
    options?

   What will happen if they fall back on their

				
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