A majority of Americans have some type of debt. In many cases, this debt takes the form of auto or home loans, possibly along with credit card debt. Repaying your personal loan or other debt is a major concern, but it doesn’t need to overtake your life.
The good news is that there are simple steps you can take to make loan repayment easier. These tips can help reach debt-free status faster, without harming your financial wellbeing.
However, making early or extra payments may involve penalties. If you’re thinking of taking such steps, it’s a good idea to check with your lender to find out about financial penalties.
1) Take a Side Job and Dedicate the Earnings to Repaying Your Personal Loan
Earning extra money specifically for repaying your loan is a great way to put extra money toward your payments. Examples to consider:
- Side hustles like rideshare driving and meal or grocery delivery
- Saving money diverted from impulse purchases
- Selling unneeded items on online marketplaces
An extra $100 or $200 a month can make getting your loan paid down faster and easier. Even though this may seem like a minor step, it’s important in the larger scheme of things. Should you pay your loan off before you’ve used the extra funds, you will have more to invest in savings.
2) Refinance Your Loan for a Lower Rate
One of the easiest ways of repaying your personal loan faster is refinancing your loan. An improved credit score or lower interest rates can make this option an especially wise choice.
Refinancing makes it easier to pay off your loans faster than expected. Your payment is lower, and if you have extra savings at hand, you can increase what you pay easily.
3) Make at Least One Extra Payment Yearly to Help with Repaying Your Personal Loan
Putting extra money aside every payday will help you make at least one extra payment yearly. Even one extra payment a year is enough to shorten your loan’s life. A tax refund, bonus at work, or smaller lottery winnings can be perfect for that extra payment.
Spacing your intended extra payment out over the year is also a great way to pay extra. A simple method is to divide your monthly payment by 12, adding that amount an extra month. This method allows you to get ahead without having to sacrifice anything
4) Round Up Your Monthly Payment Amount
A simple method for repaying your personal loan faster is rounding your payment amount to the closest to $50. For example, paying $150 instead of $125 helps get your debt out of the way faster.
As you pay off more of the loan, you may want to consider increasing the extra amount that you pay. However, make sure that this won’t incur penalties before you commit to paying extra.
You’ll enjoy lower interest rates as you get the amount down and will come closer to getting the loan paid off ahead of the due date. If paying extra is beneficial in the long run, you’ll want to do so.
5) Start Making Your Payments Bi-Weekly
Another way of paying off your loan faster is making two bi-weekly payments instead of a single monthly payment. One of the biggest advantages of this approach is having less interest accrue overall.
Making enough half-payments over time will take months off your loan, which also saves you money in the long run. If you’re willing and able to make these extra payments, you’ll benefit in the long run.
Repaying your personal loan is easier when you follow these tips and if you have any concerns or want to know how a personal loan can help you, contact us to learn more.