5 Ways To Pay Your Loan Faster

Tuesday, December 5th, 2017

Living debt-free is the ultimate goal for everyone, but the reality is that in many stages of life applying for personal loans, business loans, car loans and home loans are positive ways to help you achieve your lifestyle goals.

But once you have the loan you want, learning how to budget better and find smart ways to pay down your loans faster can help save you time – and money.

Whether your current debt is related to credit card debt or a loan, try these tips to reduce your debt as quickly as possible.

1. Make Regular Payments

If your loan is set on a monthly repayment schedule, talk to your lender or mortgage broker about paying more frequently – each fortnight, for example.

Making bi-monthly payments on your loan will help you achieve three important things.

  1. Your loan will accumulate less interest – and that means real savings in the long-term.
  2. Because there are 26 fortnights in a year, sticking to a fortnightly payment schedule will mean that you make the equivalent of an extra payment within a twelve-month period.
  1. Maintaining more frequent, regular repayments could, effectively, shave several months from the life of your loan.

*If you are applying for the loan now, talk to your mortgage broker about making fortnightly payments before signing to be sure you won’t be penalised for paying the balance earlier. If your loan is already in place, it’s important to check in with your lender for the same reason, just to make sure paying your loan faster does not attract any penalty.

2. Round Up the Payments

Want an effortless way to pay extra without even missing the funds? Round those payments up! In the same way that fortnightly payments makes a difference without breaking your budget, paying a few extra dollars means you don’t need access to lots of extra funds to knock a few months from the lifetime of your loan. For example, if your scheduled monthly payment is $264.12, but you pay $300 instead, you’ll have paid an additional $430.56 (or almost two additional payments) in a twelve-month period.

Again, check with your lender to make sure you are not penalised for making additional payments that reduce the lifetime of your loan. With some loans you can even withdraw these extra payments without charge in times of emergency.

3. Find Extra Money

Each time you make a smart decision to save money – perhaps borrowing that book you’ve been wanting to read from the library instead of buying it, or sticking to one takeaway latte a day, instead of two, you should put the savings on your loan.

Although small amounts, like $20 here and there, might not seem like much, they do add up and can make a real difference in the long term.

Imagine even just one part-time job that pays an extra $100 per month. If you put that amount on your loan, that adds up to $1200 in a year – and that makes a huge difference!

One of the easiest ways to save on your loan – whatever type of loan it is – is to talk to a finance broker about refinancing your debt.

Provided your credit rating is good, working with a professional mortgage broker can give you access to a range of lenders and competitive interest rates. If you haven’t explored the world of refinancing to reduce debt in your life, now might be the ideal time to take the plunge to consolidate and save.

4. Go Paperless

If you haven’t already gone paperless, now’s the time. Not only are you helping the environment, you might also be reducing fees and charges related to your loan. Going paperless creates a seamless payment experience that you can link to your calendar for easy reminders and avoidance of late fees.

5. How To Pay Your Loan Faster and Save

Provided you are not being penalised by your lender, paying any loan off faster than originally scheduled is a practical way to save time and money from your loans. And what could those extra savings help you enjoy? Depending on your life stage and aims, it could mean extra money for children’s educational costs, money for that dream holiday, planning for retirement, or spare cash that you can funnel back into other investments to help secure your financial future.

For more information about refinancing debt, debt consolidation and tips on how to pay your loans faster, talk to our loan specialists at Loans Actually on 03 8805 1850.

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