We all have financial obligations, and taking care of them is important, but you might be wondering how to pay off that loan fast. It’s easy to get bogged down in debt, but it doesn’t have to be that way. There are plenty of ways to pay off your loan faster than you thought, and these can also help you ensure your money is going where it needs to be. Now let’s look at eight methods for paying off loans quickly.
Paying More Than the Monthly Minimum
The easiest way to pay off your loan faster is by making extra payments. You can do this by mailing a check or setting up an automatic payment to the lender. If you know you can afford it, paying the entire balance at once will save you from paying unnecessary interest and make it easier to focus on other goals like saving for retirement or buying a house. Make sure you take into account any fees for making additional payments if your contract isn’t flexible or get a payout quote if you want to settle the whole balance.
Debt consolidation is a great way to reduce the overall amount of interest you pay. It also helps you focus solely on one account and make sure each payment goes where it needs to go instead of multiple debts that require extra admin work and dealing with multiple sets of interest to pay off . Bank rate has information about consolidating your debt.
Start by Paying Off the Most Expensive Loans
Some of your debt could be expensive loans with high interest rates. If you have extra funds available, by paying off the debts with high interest rates first, you’re saving on interest, and you can use these savings toward your other debts. You can do this by writing a check to the loan company, processing a payment online, or using the phone number they provide to have a consultant process your payment. This is called the “avalanche method”, where you work your way from your highest to lowest debt gathering momentum along the way as you allocate more and more payments to the next account as each debt is paid.
Pay More Than One a Month
Knowing the rules regarding multiple payments is important and ensuring you don’t accidentally send one of your loans to a different lender. Direct debit is the easiest way to make sure this doesn’t happen, and that your payment is always on time providing you keep funds in your bank account. You should be able to pay your debt off faster by making additional payments combined with the ones you are already paying. If you’re confident you can afford it and it works with the loan contract you have,, pay more than one monthly payment and see how it goes.
Find Extra Money
Sometimes there is money lying around in your budget that you don’t need, which is a great way to use for something important like paying off your debt. You can do this by cutting back on spending to free up cash or waiting on purchases until you have enough for them and the money for your loan payments. You can also take advantage of any rebates or coupons coming and set aside money when you receive a bonus or tax refund.
Check on Bills
Many of your payments will fall into the category of “automatic.” This means that the lender will direct debit money to pay off your loan unless you change the payment method or stop it. Since this happens automatically, you should always check on your bill to ensure everything is correct, especially if you change your payment frequency or a variable interest rate is changing.
Shorten the Length of Your Loan
Some loans may have options where you can pay them off faster. For example, you may be able to change your payment amount or frequency with your lender in order to catch up missed payments or get ahead on the loan and ultimately pay it out sooner. Just make sure you can afford the additional payments, as defaulting will often incur a fee.
Consider the Snowball Method of Paying Off Debt
This is a great way to pay off your loans if you have a specific goal. You start by paying off the smallest amount each month, then move up to the next smallest amount, and then to the biggest. This will help you work toward your goal and, at the same time, prevent you from getting overwhelmed.
There are plenty of ways to pay off your loan faster, and once you eliminate the debt that’s taking up all of your money, you’ll have extra money to put toward other things. This can help you save for retirement, buy a home, or create an emergency fund for unexpected expenses.
By: Raymond James
About the Author:
Ray is a sought-after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.