How to Pay Loans Back Faster
Are you drowning in debts? Does it feel like you’ll never get out of them? If you only make minimum payments, it can feel that way.
But what if you could pay your loans off faster?
It sounds impossible, but with a few simple steps, you can see your way out of high-interest debt. Here’s how.
Make More Frequent Payments
Creditors bill you once a month and expect payment by the due date. They don’t request or expect you to make multiple payments a month, but if you do, it knocks down the interest you pay. There are also a number of online calculators that will show you how increasing your payments will affect your loan term.
When you pay your principal balance down more frequently, you knock down the average daily balance. Many loans calculate your interest owed based on this balance which means you pay less interest over the loan’s term. It also means you pay the loan off faster.
Put ‘Found Money’ Toward your Loans
Found money happens all the time, we just don’t think about it.
Think of funds like:
- Income tax refunds
- Work bonuses
Rather than spending the money on things you don’t need, put it toward your debt. It’s not money you expected so you shouldn’t need it for your bills or daily cost of living. Applying it toward your debt brings the balance down and puts more money in your future pockets, which you’ll appreciate.
Consolidate into a Low or No-Interest Loan
If you have a lot of high-interest debt, consider consolidating it. Credit cards, for example, can be consolidated on a zero-balance transfer credit card. There may be a balance transfer fee of around 3 – 5% of the balance, so consider that before transferring, but the lack of interest should save you a significant amount and help you pay the loans off faster.
Make Extra Payments
If you don’t make more frequent payments, make periodic extra payments. Whenever you find yourself with a little extra money, put it toward your debt.
Even if you live paycheck-to-paycheck, you can find bits of extra money:
- Go under budget in any categories, such as groceries or household goods
- Your utility bills are less than expected
- An investment pays dividends
Sacrifice isn’t a word people take lightly, but if you do it to get out of debt, it makes it easier.
Living frugally doesn’t mean giving up everything. Think of areas in your life you can cut back. Maybe you stop the coffee shop stops or getting your nails done every other week. If you have a shopping habit, maybe you put a limit on it.
Any money you save, you then put toward your debt to get yourself out of it faster.
Can you Pay off Loans Faster?
It all comes down to mind over matter. If you set an intention to get out of debt, you can do it. Take baby steps to reach your goal. It’s not going to happen overnight, but small, consistent steps toward the end goal will keep you motivated and moving toward the end result – no more debt!