4 tips to pay off your personal loans sooner
This simple trick can save you thousands of dollars on a loan.
- Simply switching from paying your loans once a month to once every two weeks results in an additional payment for your loan each year.
- Other tricks like rounding up your payments and refinancing your loan can help you pay off your loan faster.
Personal loans can be a lifesaver when you need money fast, but they can also be a burden if you’re struggling with high interest rates. If you are having trouble repaying your personal loans or if you feel overwhelmed and stressed by the amount of your debts, you are not alone. Millions of Americans are struggling with high levels of debt, but there are things you can do to get back on track. Following these four simple tips can help you pay off your personal loans sooner.
1. Make bi-weekly payments instead of monthly payments
By making payments every two weeks, you’ll make an extra payment each year, which can help you pay off your loan faster. How does this work? If you repay your loan once a month, you will make 12 payments (12 months) in one year. By switching to repaying your loan every two weeks, you will make 26 equal payments, since there are 52 weeks in a year (52/2 = 26).
Even though each payment is half the monthly amount, you end up paying an extra month per year with this method, which translates to faster debt repayment. This trick also works for mortgages. For a typical mortgage, that may be the equivalent of paying off your mortgage eight years early!
2. Round up your payments
Instead of paying the minimum monthly amount, round up to pay a little more. For example, if your monthly payment is $456, round up to $500. It may not seem like much, but it can add up over time and help you pay off your loan faster.
3. Refinance your loan at a lower interest rate
Interest rates have risen significantly this year as the Federal Reserve raised rates to fight inflation. Once the Fed hits its 2% inflation target, we can expect the Fed to start cutting interest rates. If the interest rates are lower than the loan you have, refinancing with a low interest loan could help you save money on interest and pay off your loan faster. Be sure to consider the fees you must pay when refinancing your loan. Your credit score will make a big difference when you refinance. Seek to improve your score to help you get the best rates.
Apply any extra money you have, whether it’s a work bonus or a tax refund, to your personal loan to help you pay it off faster. Resist the temptation to spend it and use it for your loan instead. Look for some side shoves or overtime to increase your income. Use this money for your loans. Your future self will thank you!
Following these tips can help you save money and pay off your personal loan sooner. You can also combine these tricks to help you pay off your loans even faster.
The Ascent’s Best Personal Loans for 2022
Our team of independent experts have pored over the fine print to find the select personal loans that offer competitive rates and low fees. Start by reviewing The Ascent’s best personal loans for 2022.