Paying off a loan faster not only helps save you money on interest, but also boosts your credit if you ever need a loan in the future. There are many ways to pay off your loan faster, here are some suggestions:
• Half-monthly payments instead of monthly
Paying twice in a month instead of once will pay off the loan much faster. If the lender allows extra-payments and no prepayment penalty, bi-weekly payments will payoff is highly recommended. Interest expense will be less, and the life of your loan payment will reduce significantly.
• Paying in round figures
Again, if your lender is ok for extra payments and if your wallet can afford it, rounding up your payments will reduce the duration of the loan. Suppose your actual payment is 260 dollars a month, and you decide to round it up to 300. So you pay this extra 40 dollars every month, which means 480 dollars extra annually. This means at the end of the year, you have almost covered 14 installments in your actual 12 installments.
• Get an extra income
It can be a good idea to get a side gig or extra income to give yourself more money to pay off the loan. Any type of new income, no matter how small, will allow you to make substantial reduction in the principle amount of your loan since its money you wouldn’t otherwise have.
• Go paperless, save the earth as well
Auto-payments and digital transaction statements seem to be a meager step to help reduce your loan amount. But in reality, the automatic payments allow you to not stress every time your manually making the loan payments. With less stress, you are able to think more clearly on how to pay off the loan faster. Plus you are saving the eco-system as well.
• Refinance with a better loan
Taking a new loan with betters terms will allow you to pay off your debts faster. This is because the new loan will pay off the old loan, and with the new loan rates being lower, you are able to use any extra money saved to pay off the new loan quicker.
Criteria for the new loan, such as your current credit score, will vary from lender to lender. It is important to speak to a variety of lenders so you can compare each of their loan rates to your current loan rate so you can know if refinancing makes sense.