People end up taking out loans for various reasons including, home renovation, buying a car, uninsured medical expenses, etc. Fortunately, there are several options available for people to choose a suitable loan plan based on their needs and limitations. Some standard loan offerings include house mortgages, car loans, personal loans, credit card debt, etc.
However, most people do not acknowledge that they can save thousands of dollars through careful planning and simple actions. You can become debt-free way earlier than what you initially thought was possible. You can also have more dispensable income that you can use for more productive purposes than paying off interest. If you’re looking for sure-shot ways to repay an outstanding loan faster, it’s time to hunker down and act upon the following tips.
Pay a bit more every month
It does not hurt much to pay a little extra each month towards the end of your outstanding loan. However, you will be surprised to see the aggregate impact it can have on reducing the total number of months on your loan repayment period. Additionally, the accrued interest will also be significantly lesser if you pay some excess amount in your monthly loan installments. So, it would be best if you always rounded your monthly loan installment off to the nearest 50 or 100 dollars on the upper side, depending upon your convenience and affordability. You wouldn’t want to constrain other monthly expenses in the process. If you want to understand how interest payments work overtime, consider enrolling in an online MACC to hone your financial literacy. You’ll be to develop a better timeline of your installments without compounding too much interest.
Pay installments every two weeks
This is a fantastic hack to repay your loan before the due date. This method might sound burdensome on your pocket. Still, it inadvertently helps you reduce your outstanding loan amount in a very deft and smooth manner.
When you pay off your loan installments every two weeks, you are accruing less interest than monthly installments. This trick also reduces your total number of monthly payments as compared to your existing monthly payment regime.
Only go for refinancing if it’s cheaper
Another helpful way to reduce your outstanding loan amount is to avail a refinancing facility on your loan. Put in simple terms, refinancing means acquiring a new loan to pay off the older one. Although it may sound bizarre, it is a very profitable method to reduce your loan liabilities.
However, these type of Life Hacks only works if the interest has declined since the disbursement of your original loan amount. Your new loan will now accrue less interest than the original loan due to the reduction in the interest rates. It would be best to diligently calculate the installments and opt for another loan only if it saves you some bucks.
Pay additional installments at the end of every year
It might be too hectic for some people to pay installments every two weeks. A good alternative would be to pay one additional loan installment every year. In essence, you will be paying 13 loan installments every year instead of the original 12. The extra installment will result in less interest accrued and more savings for you.
You can also save extra money and opt for a higher amount while paying this additional installment. It will reduce the number of your total installments and also the remaining balance faster. And if you’re wondering how to save extra money during the year, the next tip will come in handy.
Kill the loan faster through extra income
Although it may be very subtle, your loan is eating into your cash with each passing minute. The sooner you can repay the loan, the better it is for your personal or business finances. You can opt for some side hustle or work part-time to earn extra bucks. You can then redirect the additional income to loan installments and repay before the final due date. This can save you a considerable amount of money and time. Once you finish repaying the loan, you can continue your side gig and start enjoying the additional cash flows. Or call it quits if you no longer need the extra money.
Skipping installments is not and should never be an option
This is a no-brainer, especially if you want to clear your debt faster. Skipping installments increases the outstanding balance, and along with it, the accrued interest also goes up. So it’s a must-do to follow your loan repayment plan religiously and never be lag behind schedule. The compounding of the outstanding interest will hit you harder in the end, and before you even know, you’ll find yourself stuck in a debt trap. Therefore, be punctual in repaying your loan installments.
The loan repayment process can often turn out to be very drawn out and tiresome for some people. It can also cause considerable stress leading to other financial and health-related problems. This article mentioned a few handy-dandy tips to repay your loan faster than usual. These include paying a little extra per installment, increasing the number of installments in a month or year, and starting a side gig for extra money. Also, it is essential not to miss a payment to avoid being behind schedule. Consider these tips and save yourself money lost in compounded interest and truckloads of stress.