You needed a big loan to help you accomplish a goal. Now it’s time to pay off that loan so the debt isn’t hanging over your head. If you don’t do things just right, you can wind up with some real trouble in your credit history. Paying off a loan doesn’t need to be difficult if you prioritize the process. You can pay it off quicker than you might think.
1. Run a Tight Budget
There are plenty of free budgeting apps than you can use to keep an eye on your spending. You may be wasting money without realizing it, and that money can be used to pay off your loan. Track your spending to find out where you can make cuts. Once your loan is paid off, you can maintain that budget to build up your savings account.
2. Earn Extra Easy Income
There are a few legitimate ways to make money for practically nothing. The easiest way is by renting out extra space in your home. If you have a garage, a basement, or a spare bedroom, use a community sharing site like Spacer to rent it out as storage space. You won’t need to deal with a roommate, and all you need to do is keep the stuff secure.
3. Freelance if you can
You might not be able to take on another full-fledged job, but a side hustle might be in order. If you’re a decent writer, or you have other professional skills that you can remotely contribute, consider freelancing. You can make your own schedule, pick your own rates, and generate a little extra income to put towards your loan.
4. Declutter and profit
If you have a garage or a shed full of stuff you’re not using, or some old furniture hanging around that you’ve not yet decided what to do with, sell it off. It’s always nice to declutter your home. You’ll have more space, it will be easier to clean, and you can set aside whatever you make to help you with your finances. It’s a two birds, one stone scenario.
5. Pay more frequently
Paying every two weeks, rather than once a month, can keep your interest rates down. If you take that small extra step, you’ll wind up saving in the long term. Just divide the monthly payment in half and make the payment twice. Make sure this is okay with your lender before you do it – some of them don’t like bi-weekly payments because of the way their payments are processed.
6. Pay a little too much
Loan payments are rarely an even number. If your monthly amount is something that doesn’t quite round off, consider overpaying. If your monthly payment is $224.32, round it to $250. That’s an extra $308.16 annually, which is more than an extra payment every year. If it’s a long-term loan, the benefits add up. In five years, you’ll be $1,540.80 ahead of schedule.
7. Refinance when possible
If your credit would be considered fair to good, you can probably refinance your loan through a credit union. The interest might go down substantially – maybe even as much as half. Your payments will lower substantially, and you might even be able to pay off your loan much faster.
By paying off your loan in its entirety as quickly as you can, you’re accomplishing two things: a loan paid in full looks excellent on your credit history, and the elimination of the loan payment will give you more cash to work with every month. Push that loan up to the top of your list of priorities, and you’ll feel financial freedom sooner than you expect.