It’s usually a quick, easy, and painless process to obtain a loan but when it comes to paying it down, a person can run into all sorts of trouble. It can get out of control quickly, with missed payments and accumulating interest. Before things get worse, slow down and take a breath. There’s always a way forward.
Here are ten possible ways on how to pay off loans faster:
1. Know the Rules
Every loan comes with certain rules on penalties for non-payment, potential consequences for overpayment or paying early, and more. Some loan servicers may also choose to apply an additional payment amount to the following month’s payment, instead of applying it to your current balance.
Different types of loans have different guidelines that should be followed. Paying off your payday loans will be different from paying other types of loans. Be sure to understand what’s allowed and what isn’t around loan payment options.
2. Write Out the Facts
Identify what you owe, the interest rate, and what the required payment schedule is. This is something that can be done alongside with crafting a monthly budget detailing all expenses, income, and due dates on monthly bills.
Having the facts written out in front of you will help in creating a blueprint that you can work from to finalize a manageable long-term loan payment strategy.
3. Commit to Paying It Off
Some people see a loan’s payment schedule and stick to it, all the while paying interest they otherwise wouldn’t have to if they committed to paying it off as quickly as possible.
Don’t be satisfied with the ‘minimum amount owing’ every month. Be ready to do what you can to add more. Any surplus money at the end of the month, don’t go spending it elsewhere. Your loan is where it should be going until the amount owing is fully paid off.
4. Round Up Your Payment
The loan payment schedule likely doesn’t give you whole numbers. Let’s say you’re supposed to be paying $164.75 every month. For your payment, round it up to $200. This is an addition of $35.25 over what’s actually owing.
It’s a small surplus of money that you’re putting towards your loan, however, that’s a huge chunk of money in the long-term. Most people don’t have $100s to put towards their loan but you don’t need to. Just a little bit more on every payment has a way of accumulating.
5. Make Biweekly Payments
Assuming you’re able to, make biweekly payments on your loan instead of monthly payments. Paying every two weeks can shave off some interest, reduce your repayment schedule, and keeps more money in your pocket in the long-term. If your focus is to pay off a loan as fast as possible, biweekly payments are more advantageous than monthly payments. If this isn’t an option, speak with a loan representative and inquire about it.
6. Minimize Expenses
Some expenses – like rent – are necessary. Then, there are fast food purchases and buying groceries without looking for sales, deals, and coupons. If you work at a job where you have a fixed income, you can’t just ask for more money. Your income is your income. That’s unchangeable. What you can do is try to reduce the funds leaving your pockets. Divert these savings towards your loan.
7. One-Time Cash Boosts
One-time cash boosts can help a great deal in getting you surplus money outside your budget. Consider what you can sell – i.e. electronics, furniture, etc. – to make money. Rent out a room where you’re living. Consider offering a service as a consultant, tutor, or freelancer locally. Consider becoming a driver for a rideshare service. These are all ways to make money. If you get a raise, signing bonus for a new job, or come into money by some way, divert most of it into a loan payment.
8. More Work = More Income
See if there’s overtime available at work, ask for more hours, or consider getting secondary employment part-time. Even an extra 4-8 hours of work per week increases what you take in monthly. More hours or a second may not be possible for everyone. This is completely understandable. If it’s not, it’s not. That’s ok. We would be remiss if we didn’t at least mention it as a strategy to paying off loans faster.
9. Refinance Other Debts
Refinancing debts that are carrying high interest rates can help to reduce your long-term payments. Call any creditors that you owe money to, inquiring about settlement offers or a reduced interest rate. Consider any government or utility company programs that could help minimize the monthly debts incurred on those bills. Any opportunity you have to save money, absolutely take it. This leaves more for you to pay down your loan.
10. Give Yourself A Deadline
When mapping out how much you’re going to put towards a loan, be realistic about the schedule. Don’t put too much pressure on yourself. Anything you do for extra income or in reducing expenses, it only has to be temporary. Let’s say, you decide to give yourself six months and every action within those six months, financially speaking, will be put towards paying off a loan. This is a specific period of time where you can justify making certain sacrifices because they’re only temporary.