Being in debt stinks. I’ve always felt that owing the bank (or some finance company) money is like having something hanging over your head. If anything goes wrong and causes you to miss your monthly payment, your whole world could quickly come crashing in around you.
I do understand, though, that debt is a necessary tool for many families. Let’s face it; many of us can’t afford to pay cash for a car. And how many of us can pay with cash for a house? Debt it just a part of life for many people.
All of that said, debts or loans should always be repaid as quickly as possible. The sooner you can pay that loan off, the sooner you can remove that weight hanging over your head. To help you along, I’ve come up with these five tips to help you pay your loan off early.
Round up. The easiest way to pay off a loan early is to pay a little extra towards your principal amount every month. If your monthly payment is $192, you could simply pay $200. You won’t notice the extra $8, and you’ll accelerate your payment plan.
Keep steady payments even if your loan isn’t. Sometimes mortgage payments change. Your escrow amount might vary, for instance, from year to year. When your payment goes down, don’t adjust down to it. Instead, keep paying the payment you already budgeted for. The extra will just go towards paying your loan off early.
Earmark extra money for your debts. When you receive an unexpected windfall like a bonus at work, you should send those in directly to your lender. You can direct the extra payment to be applied to your principal balance. Since you weren’t expecting the money, the extra money won’t be missed from your budget.
Make biweekly payments. Many lenders will set you up on an accelerated payment system like making biweekly payments instead of monthly payments. Each year, you’ll end up making an extra payment.
Take the money from your savings. Although I would never suggest emptying your savings account to pay off a debt (that’s a whole different kind of thing hanging over your head), there’s nothing wrong with removing some money from your savings to pay off a loan. You can quickly rebuild your savings account after you don’t have to make those debt payments anymore.
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{ 2 comments… read them below or add one }
A debt snowball is also a good idea. After you pay off one loan, take that amount and add it to the amount you’ve been paying towards another loan. That’ll help get the debt paid off sooner as well.
Another thing I also like to do on the front end of any loan that I apply for is to make sure that there is no penalty for paying it off early.
But what a great post! Thanks!