Creative Tips to Pay Your Loan Early
Are you eager to pay off your loan early? It will let you save money and you can stop paying interest. Some loans can drag on for many decades and the interest you pay will add up over time. While some loans might be short termed, but the interest charges can make them very expensive. If it is a high cost credit card debt then paying only the minimum is an absolutely bad idea. So, the best solution is to pay off your loan early. You may have to make a few changes in your monthly budget and give up a few luxuries, but the benefits of an early payoff is much more. You can find various creative ways that will help you to pay your loan as early as possible.
Try Making Bi-Weekly Payments
Instead of making regular monthly payment, pay half of the payment to the lender every two weeks. By divining the one payment into twos, you can accomplish a few things that includes-
- Since your payments will be applied more often, less interest will get accumulated.
- If you make payments every two weeks you will be making one extra payment in a year.
- Making such payments will save off several months throughout the duration of the loan
Before making such bi-weekly payment make sure you discuss about it with your lender. There are several lenders who might penalize you for making extra payments or paying off the loan amount early.
Try Rounding Up Your Payments
An effortless way to pay extra is to round up the payments. The best part of rounding off is you will never have to miss any payment in the process. Just like bi-weekly payments, there is no need to pay a lot of extra funds to knock a couple of months off from your loan term. All you will need to do is simply round up the amount that you pay every month. For instance, if you pay $264.12 every month, you can choose to round it up to $300. So, every month you will be making an extra $35.88 per month. After 12 months that will add up to an extra $430.56, which is almost two additional payments. Making such extra payments will add up a significant amount over time, which will shorten the loan term and help you save money on interest.
Earn Extra Cash
There are likely to be several stuffs laying around at your house that you no longer use. Instead of getting such stuffs piled up, consider selling them online or organize a garage sale. You could easily earn a few extra pounds that might not seem a lot, but they will definitely add up. You can also consider working extra hours or taking up a second job and you can earn extra. Even an extra £100 per month put toward your loan will help you get out of your debts early.
Try Making One Extra Payment
If you are unable to commit to bi-weekly payments or rounding off the amount you pay every month, you can try making one extra payment in a year. It will also let you achieve the same result. You can use the money you receive from a tax refund or the bonus offered from work to pay one extra payment once in a year and pay down your loan faster.
Refinance Your Loan
You can also lower your payment and save interest by refinancing your loan. This can help you to pay off your loans at the earliest possible. There are several local banks and credit unions who offer a comparatively low interest rate on car loans and mortgage loans. So, try to check out the various refinance options available for you.