Personal loans often come in handy when you are making a big purchase. However, you need to carefully plan your repayments & consider the interest being charged. If you schedule to make more frequent payments you could be in a position to pay your loan off faster. Here are a few tips to help you pay your loan faster.
1. Make Payments Every Fortnight or Week
If you have a personal loan or considering getting a personal loan for a car, bills or a holiday you may be aware that a lot of lenders set up repayment structures on a monthly basis. It may be in your best interests (pardon the pun) to restructure your payment cycle from a monthly payment to fortnightly. By converting to a fortnightly payment cycle it will mean you end up making more payments throughout the year without actually spending more.
$1,000 x 12 monthly payments = $12,000
$500 x 26 fortnightly payments = $13,000
In this example there is an additional $1,000 being paid off your personal loan & there are additional interest savings to be made in some instances based on the interest accrual.
2. Make Extra Repayments
If you want to payout your full personal loan amount sooner, you should consider making additional loan repayments. When you make additional repayments it may not feel like a great deal each pay however when interest is calculated on a daily basis and you reduce the amount of payments you in total.
ALSO READ: Guide To Taking Out Personal Loans
If you are paying high ongoing fees & interest, you will find it difficult to pay your loan out quickly. There are a few ways to reduce the costs and speed up the payback period of your personal loan. You can do this by refinancing your personal loan to take advantage of lower charges and fees.
Bear in mind you still need to repay the original amount in order to make sure you repay the loan sooner. On the other hand, you could also choose to refinance the original loan into a home loan. That way, you will secure a lower interest rate which allows you to pay off your personal loan in a much faster time frame. However, you still should aim to repay your personal loan amount first and foremost to make sure the refinanced debt reduces faster instead of being part of your mortgage for the next 25-30 years.
4. Reducing Debt
Reducing your debt, or opting to pay your loan out sooner than the loan term, is a good option to consider. However, you need to confirm if there are any penalty fees applicable. Most personal loans issued by the large banks allow you to make additional payments without adding any penalties. However, you should check first so you avoid any surprises or hidden fees later on.
Try one or more of the methods outlined above to repay your personal loan sooner. Eventually, you could save a lot of money on the interest payments and take another personal loan if need be. If possible, write a financial diary to keep track of the payments to make sure everything is done on time and effortlessly.