Tips for repaying loans sooner
No matter what type of loans or debts you have, there are always ways to repay them sooner and potentially save thousands of dollars in interest and fees.
In this article we will address some of the most common and achievable ways to reduce your debt sooner.
Make fortnightly repayments
This is one of the oldest tricks in the book, and is without doubt one of the easiest ways to repay a loan sooner.
Simply take half of your normal monthly repayment and pay this amount each fortnight. The strategy works because there are 26 fortnights in a year. This means you will be paying 26 half repayments, which is equal to 13 full repayments.
There are only 12 months in a year, and therefore 12 monthly repayments required. Because you have paid 13 monthly repayments, you have put yourself one month ahead in your loan repayments.
This may not seem like a huge amount, but over the years this will help you to get ahead by months and even years on your repayments, which equals less interest and a debt which is cleared much sooner.
Pay more than the minimum
Making extra repayments may seem like an obvious way to reduce your loans sooner, however many people lack the discipline to follow this strategy consistently.
If you cannot afford to make large additional repayments onto your loan, try rounding up your existing repayment. Rounding up to the nearest $100 would be a great result, but if money is very tight, even just rounding up to the nearest $10 or $20 can make a difference over the long term.
Every dollar you pay onto your loan over and above the minimum repayment is coming directly off of the loan balance. This helps to reduce the interest charged, and the compounding effect makes this strategy work more and more effectively as time passes.
Refinance to a better loan
High interest rates and fees can make the job of repaying debts a lot more difficult. If your loan or credit card has high fees or a high rate of interest, it could be worth investigating the other options available.
You can look at refinancing a single loan, or if you have a number of debts you may be able to benefit from a debt consolidation. A debt consolidation involves rolling a number of debts into a single debt with a lower overall interest rate.
If you can find a better deal on your loans you may be able to reduce your monthly repayments, but it is important to try and maintain your original higher repayments in order to reduce your loans even sooner.
Review your budget
Sometimes we can try every method possible, and still cannot manage to repay our loans and credit cards any sooner. If this is your situation, it may be time to put a budget in place or review your existing budget.
If you can cut down your spending in other areas you can direct that money towards repaying extra onto your loans. This could mean making some sacrifices in the short term, but by repaying your debts sooner you will be in a much better financial position in the long term.