Who doesn’t want to repay their loans fast? Loans can put immense pressure and one can often feel like it’s a never-ending journey. But what if there were some tricks to reach the destination faster? Paying off your loans sooner not only saves you money on interest but also frees you from the burden of debt. In this blog, let us explore some practical tricks to help you pay off your loans faster without making your life a financial burden.
What is a Loan?
Before we explore the tricks, let’s understand the basics. A loan is money borrowed by a person that needs to be paid back, usually with interest. Loans can be taken for various things like purchasing cars, homes, education, or any unexpected expenses. The faster you pay it off, the less you pay in interest, leaving you with more money in your pocket.
Create a Budget
The first step in paying off your loans faster is getting a clear picture of your finances. Create a simple budget that outlines your monthly income and all your expenses. Be honest with yourself about where your money goes, and identify areas where you can cut back. Allocating extra funds to your loan payments becomes much easier when you have a budget to guide you.
Make Bi-weekly Payments
Instead of making monthly payments, you can consider dividing your monthly payment in half and paying that amount every two weeks. Why? Because there are 52 weeks in a year, meaning you’ll end up making 26 half-payments or 13 full payments instead of the usual 12. This extra payment each year can significantly reduce the time it takes to pay off your loan.
Round off Your Repayments
Another trick is to round off your loan repayments. For instance, if your monthly EMI is Rs.1087, you can consider rounding it off to Rs.1,100. This extra amount may look small, but over a period of time it can accumulate and accelerate your loan repayment. This little trick can make a big difference.
Allocate Extra Earnings
Unexpected money like tax refunds, bonuses, or gifts, can be a golden tool to make a deduction in your loan. Instead of splurging on things you don’t really need, you can consider directing these money towards your loan. It will be a strategic move that will pay off in both the short and long term.
Pay your High-Interest Loans
If you have multiple loans, prefer to pay off the ones with the highest interest rates first. Repaying high interest loans first saves you money in the long run. Pay the minimum on all your loans, but put any extra funds towards the loan with the highest interest rate. Once it’s paid off, redirect that money to the next high interest loan.
Refinance Your Loan
Refinancing your loan means replacing your current loan with a new one, usually with better terms. If your credit score has improved after you took the loan, you may qualify for a lower interest rate. A lower interest rate means less money spent on interest and more money reducing the principal amount.
Start a Side Business
Sometimes the key to paying off loans faster is increasing your income level. You can consider starting a side business or doing a part-time job and channelise all the extra income earned to your loan payments. There are various means to increase your income; from freelancing online to selling handmade crafts, coaching etc that can accelerate your loan repayments.
Negotiate Lower Interest Rates
You can contact your present lender and inquire about the possibility of lowering your interest rates. A lower interest rate means more of your payment goes towards the principal, thus helping you pay off the loan faster. It requires some negotiation skills, but it’s a communication worth having.
Snowball or Avalanche Method
Two popular strategies for paying off multiple loans are the Snowball and Avalanche methods. In the Snowball method, you focus on repaying the smallest loan first, gaining momentum with each repayment. The Avalanche method targets the loan with the highest interest rate first, saving you more money in the long term. You can choose the method that match your financial goals and personality.
Repaying loans faster is like a marathon, not a sprint. You need to stay consistent with your efforts and find ways to stay motivated. Learn to celebrate small wins along the way, whether it’s paying off a certain percentage of the loan or reaching a specific goal. Consistency and motivation will carry you through to the finish line.
Repaying your loans faster is a goal that can be easily attained with the right strategies. By creating a clear budget, making extra payments, and staying focused on your financial goals can fast-track the process. Actually, it’s not about making any changes overnight, it’s about implementing these strategies consistently.
Therefore, start using these tips today and watch your loan balance decrease faster than you ever thought possible.
SHREYASS FINANCE is a boutique firm offering customized financial services on PAN India basis in Fundbased and Non-fundbased products and services. Interested can call on 9967803324 or mail to shreyassfinance@gmail.com