How To Repay A Personal Loan Sooner
Personal loans can be a great way of purchasing big-ticket items that you need right away, but after the excitement of the purchase you need to start repaying the loan.
Most people understand that the quicker you repay a loan, the less it will cost you over time. So how can your repay your personal loan sooner, and save money in the process?
Almost all personal loans will be established on a monthly repayment basis. This means that your interest is charged monthly and your minimum repayment is calculated on a monthly cycle.
One the easiest ways to repay your personal loan sooner is to switch from monthly repayments to fortnightly repayments. To do this you simply halve your monthly repayment and pay the amount fortnightly.
This strategy works because there are 26 fortnights in a year, meaning that you will make 13 full repayments each year. With only 12 monthly repayments required you will end up making one extra full repayment each year.
By reducing your personal loan by one extra repayment each year you will repay your loan sooner, and the reduced interest charges by paying fortnightly will further assist with the process.
Make Extra Repayments
If you really want to repay your loan sooner, the best way forward is to make extra repayments onto your loan account.
If you can make large additional lump sum payments from time to time you will reduce your balance sooner, but even just paying a few extra dollars with each repayment will help.
An easy way to increase your repayment is to simply round up to the nearest $10 or even $100. It may not seem like much at first, but over the years you will certainly notice the benefits.
Paying a high rate of interest or high ongoing fees can impact on your ability to repay your personal loan sooner. If you can reduce these costs, you will have a great opportunity to reduce your balance more quickly.
By refinancing to a new personal loan with lower fees and charges you could save anywhere up to $50 or more per month on your minimum repayment. The trick is to keep paying your original repayment amount, which will ensure your loan is repaid sooner.
Another option is to refinance your personal loan into your home loan. This can be a great way to secure a low rate, however it is important to maintain your full original repayment amount to ensure the refinanced debt is reduced quickly rather than sitting on your mortgage for thirty years.
Before going down this path it is important to check for any penalty fees on your loan. Most personal loans issued by the big banks will allow you to make extra repayments without any penalties, but it is still worth checking this first to avoid any nasty surprises.
By using one or more of the methods detailed above you can certainly repay your loan sooner, which could mean hundreds or even thousands of dollars saved in interest.