One of the best way to get financial freedom is paying off your loans faster. Whether you have a Car loan, a home loan, a personal loan or any other loan, you would like to get rid off your debt as soon as possible. It will be a great feeling to achieve something but paying a large portion of your salary towards the EMI payment is not the happiest feeling. The process of getting out of debt will end with hard work and headache. No matter what kind of loan you have taken, paying it off may take years or even decades. The longer you owe money to a lender or bank, the more interest you will be charged. Thus, it may end up making the repayment amount bigger than the principal amount you have borrowed. There are many benefits if you pay off your loan quickly. You can save money on loan interest, improve credit rating and free up cash for other expenses.
Below are some of the tips to save your money, increase your income and pay off your loans faster:
Make repayments more frequently
If you are repaying loan once per month, consider making biweekly payments Instead of making one monthly payment. It could be a great option for paying off your loan faster. Split the payment in half and make payments every two weeks, by doing this you could be left with more manageable half-payments and your total interest paid and life of your loan get reduced. So, whenever you get festival or performance bonus, instead of using it for purchasing expensive LED television or latest IPhone, make repayments. If you do certain compromises, you will end up saving a lot of money in the long run. But, before making bi-weekly payments, make sure to consult with your lender because you might be charged for any extra payments or paying off the loan balance early.
Make larger and extra repayments
Instead of making Biweekly payments, some people prefer to make larger or extra payments than the actual repayment amount. This idea will reduce your future interest charges and you will get out of the debt sooner. You can comfortably afford these Incremental amount and extra repayments without much effect on your monthly or yearly household budget.
Refinance Your Loan
Refinancing is one of the most traditional and easiest ways to save money on interest and pay off a loan faster. Many banks and credit unions offer refinancing. So, don’t miss if you get a better deal from your current lender or try to switch to a new one. But before applying for refinancing, consult your financial advisor or lender. Check your credit score, if it has improved since you took loan, you could have good chances of getting approved for refinancing. Keep your payment history clean, some lenders put more weight on payment history and credit score over the remaining loan amount. Keep in mind, refinancing may increase the life of your loan.
Earn extra income
If you have extra time apart from your normal work hours, start side business or do part time job to get additional money to pay down your loan. You can earn extra money by giving a room in your house for rent, by buying things such as artwork, books, china toys, jewellery, tools, etc. for low price directly from manufacturers, flea markets and estate sales and sell them on online sites at higher price than the price you bought. You can also do seasonal jobs or business during festivals and holidays. You can sell unwanted and extra things on sites like OLX and QUICKR.
Minimize extra expenses
Make a list of your monthly expenses and income. Calculate even your daily expenses or habits and try to cut off or get rid off the things that you feel it is not necessary such as smoking or drinking, restaurant food, landline telephone, cable television channels, internet and other bills, vacations, shopping, etc. By eliminating these small expenses, you can use that money to pay off your loan faster.
There are many other ways to pay off your loan early and you will have lot of benefits, but the biggest is less risk and less stress, because you won’t be a slave to your lender anymore.
No matter what type of loan you taken, it’s necessary to know there is a way out. It may not happen overnight, but a loan free future could be yours if you create a plan and stick with it long enough.
These tips will help you to pay off loan faster. And the faster you become loan-free, the quicker you can start living the life you truly want.