Eight tips to pay off your loan debt faster
If you’re looking for tips and tricks to add to your loan repayment strategy, you’ve come to the right place. The advice here will help you manage your debt and avoid overpayment thanks to interest. Read on to discover eight tips to help you pay off your loan debt faster.
Pay more than the minimum.
When you receive a credit card or loan statement, you will be told the minimum payment you must make, and you should always make this payment on time to maintain your creditworthiness. However, if you have the ability to pay more each month, you can save on interest and pay off your loan much faster. Rounding up to the nearest multiple of ten can be a quick and easy way to pay more than the minimum without having to pay back a lot.
Pay extra every month.
If you can only pay the minimum amount before the due date, that’s fine. It can be difficult to budget for a larger payment before the due date, since rent may also be due at that time. Consider making an additional payment once a month, as even the smallest amount can significantly reduce the total amount you have to pay while your loan is being paid off. When you’re paid bi-monthly, it’s easy to pay your minimum with one of your monthly paychecks and pay a small amount like $20 with the other.
Refinance your loans.
If you got your loan when you were in a worse financial position than you are now, you may be able to refinance your loan and continue at a lower interest rate. If your income and credit score have increased recently, contact your lender and see what refinancing options are available. Refinancing can also adjust the minimum amount you owe each month, which can also help reduce your stress in creating your budget.
Set up automatic payment.
While this tip won’t necessarily help you pay off your loan faster, it will help you avoid making mistakes that will lengthen your repayment schedule. Setting up automatic payments is a quick and easy process, and you can usually choose how much you want the automatic payment to be. For example, you can choose to have the automatic payment amount equal the minimum payment owed, or you can choose to make a higher payment amount. Setting up Autopay will help you stay on track.
Stick to a strict budget.
It sounds obvious, but sticking to a strict budget is easier said than done. At the beginning of each month, sit down and create a budget that really works for you. It’s easy to create a budget that includes just rent, groceries, insurance, and debt payments — but is that really realistic? You need to be honest with yourself and allow yourself at least a small budget for entertainment or a gym membership. You don’t have to limit yourself to everything, but you should aim to stick to the basics when it comes to paying off your loan.
Check if credit transfers are right for you and your credit type.
In some cases, it’s possible to transfer the balance of a high-interest credit card to another credit card with a much lower interest rate. Some banks even offer special cards designed for this type of use. While it doesn’t erase any of your debt, it can help limit the amount you have to pay in interest, resulting in a shorter repayment schedule.
If you have multiple loans to pay off, consider a debt consolidation loan.
This is just a helpful tip for when you’re juggling multiple loan payments and are overwhelmed by the amount of insurance for all of the loans and lines of credit. If you are able to qualify for a debt consolidation loan at an affordable rate, you can take the funds from that loan and use it to pay off all of your other loans at once. This allows you to save on interest and create a situation where you only have one monthly payment to deal with.
Additional income = special payments
While it’s definitely okay to indulge a little if, say, you’re getting a huge bonus at work, you should aim to use the bulk of the extra funds toward paying down your debt. Make a plan what you will do with additional funds. For example, you can decide ahead of time that you’ll use 70% of your extra income for debt, 20% for savings, and 10% for a fun expense. Create a formula that works for you and your situation and stick to it until your loan is repaid!
If you stay focused and incorporate these tips and tricks into your loan repayment strategy, you’ll be well on your way to paying off your loan as quickly as possible. Remember that half of what makes paying off a loan so difficult is the extra amount of interest you have to pay over time, especially if you’re only making the minimum payments. These tips will help you avoid overpayments and find yourself in a situation where you can comfortably manage your finances and avoid additional stress.
Story by Pavel Khaykin