So, you managed to secure yourself a loan to help you out of a tough financial spot. This can be great (even life-saving, literally) at the time, but it also means that… yep, you have a hefty loan to pay off and a fair amount of debt to your name that needs to be cleared. Besides paying the amount you owe, you also need to settle the interest on your loan.
Although most loans will have a repayment schedule that you will have had to agree to before being given the loan, in some cases, you might have turned your financial situation from a struggle to something a lot healthier since you initially took out the loan.
This might mean that you are looking to pay your loan off faster so you can cut down on the interest fees that are slowly but surely racking up with every repayment you make. But with fixed payment terms and scheduled payments, is there even a way to repay your loan early?
That is what we are here to help you with! We have put together a list of the best ways you can repay your loan faster. Alternatively, you can learn even more about everything you need to know when trying to pay off an existing installment loan by checking out Credit Ninja.
1. Make Bi-Weekly Not Monthly Payments
Instead of only paying towards your loan debt once a month, upping this to once a week means you get to submit payments that are half the cost, twice as often.
This can be hugely beneficial to those who are paid fortnightly, for a start, but it can also ensure that less interest is accrued while you are paying off the debt as the payments will be applied to your loan more frequently. Paying off your debt regularly will also help you budget your monthly funds. You can schedule which bills you need to settle on a particular date so that you won’t fall short on your other essential expenses.
Plus, making 26 payments every year means you will make one full extra payment for the year compared to monthly, which will shorten the loan!
2. Round Up Your Payments
You might think that adding an extra couple of cents onto your monthly payments will not make that much of a difference, but to that we say – you would actually be surprised.
The more you round up, of course, the faster you will pay off your loan without it feeling like you are having to make too many additional payments on top of your regular payments. If you can pay a bit more than your monthly bill, do so. It may help lessen your future payments and prevent your interest from building up.
Even just paying $50 towards your debt instead of $30 can make a big difference without feeling like you are losing too much from your budget.
3. Make Additional Payments
If you would prefer to make one-time, extra payments rather than trying to round up what you would usually pay off in the month, then you can do this as an alternative option.
This can also be a good idea for anyone who is doubtful about making bi-weekly payments instead of monthly payments as there is more flexibility to only pay off more when you have a little bit of extra money leftover in your budget for any given month.
So, if you have a birthday for which you are given some extra cash, for example, why not buy some beers and put the rest towards an additional payment to clear your loan quicker? To pay your loans quicker, try to make a habit of setting aside your extra money for additional payments. It can also be your security funds when you find yourself having insufficient cash to pay a monthly bill.
4. Refinance Your Loan
Something you can look into if you have noticed that the interest rates have dropped since you were originally given the terms for your loan is refinancing. This can be a great way to not only pay off your loan faster, but also to make sure that you are paying less interest! For instance, you can consider refinancing your current mortgage if you have more financial freedom. It could also be great for you if other payment terms seem more affordable.
The majority of refinancing options will include the ability to shorten the term of the loan which usually involves making higher payments for the last months of your loan term so that you pay it off quicker without affecting the interest rates or lowering them at least. You could save some money with this option rather than sticking to the original agreement you signed.
5. Do Some Overtime to Boost Your Income
The more money you have to pay towards your loan, the sooner you will pay it off. This is just simple logic. For instance, if you can settle a considerable amount in one payment, it may ease the interest accumulating on your loan. So, to make sure you have a higher amount of disposable income that you can set aside for paying back your loan once you have accounted for any other bills or expenses that are set to come out of your account each month, you could do some overtime.
This does not necessarily mean that you need to pick up some extra shifts at your current place of employment, although this is one of the more obvious ways to boost your income, but it could also mean taking up a side hustle to support your main source of income.
Selling your old, unwanted belongings on Ebay, for example, or setting up an Etsy shop where you can sell your artwork and paintings can be a great way to increase the amount of money you can afford to pay towards your loan debt at the end of each month.
Although it may seem like an overwhelming task, paying your loans isn’t too difficult to do. You can consider changing your payment schedules or refinancing your loan to ease your financial burden. Being smart about your money will help you pay off the debt you owe in no time.