Figuring out how to pay off your loans let alone pay them off quickly can be difficult. Life doesn’t pause or show some pity just because you’re in debt. You know, like they say, “life goes on” and it’s not always pretty.
Nevertheless, paying off any loans quickly can save you money. There are specific ways you can do this, which we’ll get to in a jiffy, but be sure to contact your lender to credit and document things properly for you.
For some people, they may need an extra push or motivation to encourage them to work towards earlier loan repayment. In that case, even if you don’t like numbers, it is beneficial to see how much you’ll save in the long run when you pay off your loans. For an auto loan you can use a car payment calculator, while a loan amortization calculator or simply learning how to calculate loans on your own can help you stay the course.
Change or upgrade your repayment strategy with the following options.
Earn more money
Sometimes people get into debt because they can’t afford the things they want to buy. This sounds simplistic but it’s quite practical: earn more money so you can pay off your loans faster.
Sites like eBay allows you to sell items you’re not using, while sites like Upwork, Freelancer, People per Hour, and others allow you to offer your services to people who may need them on the internet. Any time you make extra money, you can use it to pay your loans. You’ll be surprised how much it adds up.
For example, if you get an extra gig online or offline that pays $200 to $500 a month, that’s an extra $2,400 to $6,000 in one year. Keep it for the loan.
Channel your raises to your loan
If you have a job where you get a raise each year, what would you do with the extra money? It’s tempting to buy stuff you don’t need impulsively with the extra money, but you’ll be better served if you save impulsively instead.
Sure, some disciplined folks may initially plan to use any extra money for investing, but if you’re in debt, you can decide to split your raise into two, where one part goes to an investment of your choice, and the other goes directly to pay off your loans. In this way, the extra money from your raise helps you pay off your loan faster, and your investment may also better your finances which would mean you can still channel extra money to loan repayment in future.
Round off payments
Maths may be the subject you detested most in school, but as you’ve probably already discovered, some math skills help when you’re paying off loans. Typically in maths, when rounding off an amount like say $224 to the nearest ten or hundred, you’ll get $220 and $200 respectively. If $224 is bi-weekly payment for your loan, such rounding off would mean your loan repayment will take more time.
What you can do here is round it off to a higher number that ends with a zero. $224 can become $230, $240, or $250. Depending on how much extra money you have, it can even be $300. That way, you’re rounding off, but you’re not exactly following any conventional maths rules. Even if your loan repayment is monthly and not bi-weekly, it adds up over the course of the year.
For example, if you decide to pay off your loans with just a few extra dollars a month extra ie $250 instead of $224 as monthly payment, you’ll pay an extra $312 in one year, which is more than money for an extra month! On the other hand, if $224 is bi-weekly payment and you pay $240 or $250 instead, you’ll have paid an extra $432 or $702, the latter being more than enough money for one and a half month of payment.
Trim your budget
I know almost every personal finance guru makes seemingly vague statements such as the above and sometimes you’re left wondering what to trim when you’re already on a shoestring budget. But the truth is, what to cut off will differ from person to person, and that means there’s no one-size-fits-all solution to this.
It can involve moving into a cheaper apartment or finding someone to share rent with. It may also involve giving up cable TV, eating out, alcohol, smoking, certain club memberships, newspaper and magazine subscriptions, etc. As you can see, you’re only limited by your imagination. Also, always remember that it is temporary (though you may eventually enjoy cutting off some expenses indefinitely) and just to help you pay off your loans faster.
Whatever strategy you use, loans do not disappear overnight, so pick one or a couple you can stick to for excellent results.