Paying off your debt faster will mean that you should start paying more than the regular installment that is required every month. But, firstly, read your original contract on the credit agreement to find out what the conditions regarding early settlement of the loan might be.
Sometimes there are penalties for early settlement because the financial institution will lose money if your payments stop earlier. They will also lose the interest that is added to the original loan amount.
5 Tips for repaying your loan faster:
- Make payments twice a month: Divide your monthly payment in 2 and pay that halved amount every two weeks. You will be accomplishing three things; less interest, you will have paid a whole extra payment at the end of the year, and doing this from the start can shorten your pay period with several months.
- Make rounded payments: For instance, if your payment is for the amount of 235.15, pay 300.00. Over time these little extra bits will make up a few extra payments and it will save you money.
- Somewhere, sometime, make an extra payment or payments: Using any extra money, like a tax refund, or your yearly bonus, to pay off even more, will definitely towards paying off, the loan faster.
- A savings account: You can stow away money until you have a substantial amount which can be used to pay off more on your loan. When the outstanding balance is less, you can negotiate with the band for a new repayment arrangement.
- Paperless: When you organize for automatic payments into your account. This will save the lender money and you do not have to worry about late payments. The repayments are never going to be late. Online billing, no printed papers, printed statements etc. will make more sense and save time.
Paying off any type of loan earlier will mean that you save interest which means more money and that can mean so much more. The extra money could go to a retirement fund, make improvements on your home or go on that long awaited holiday.