How to Pay Off a Loan Early in Five Simple Steps

April 9, 2021

How to Pay Off a Loan Early in Five Simple Steps

Debt comes from a variety of sources. But whether it’s from student loans or credit cards, it eventually needs to be paid. Debt from a personal loan typically has fixed terms, which you agree to when you ask for the loan.

However, loan debt can quickly accumulate interest, which is a percentage of the loan you must pay. Regardless of the type of loan you took, paying it off as quickly as possible is the best thing to do. Here’s how you can do so in just five simple steps.

Make an Extra Payment

In addition to making your monthly payment, paying a little bit more can lower your interest rate. You can accomplish this by choosing a set amount and dividing it by the number of months left on the loan. To pay your loan off faster, you can then set a budget and pay that amount.

Pay Early

Another way to pay off loan debt quickly is to pay early. In most cases, you have a monthly due date. If you pay earlier than your due date, you accrue less interest. However, it’s important to note that you should never pay late. Doing so can lower your credit score. Your loan servicer may charge you a late fee as well.

Consider Refinancing

If you’re looking to pay off what’s left of your loan debt in one balloon payment, refinancing is an option. Refinancing a loan is when you consolidate the loan, and possibly other types of debt, into one payment. Whether you’re eligible for refinancing depends on the original loan terms and your lender.

Look to Your Lender for Help

Successfully paying off debt isn’t always easy. Not being able to pay on time is stressful; however, there are things you can do. Start by talking with your lender. While this is solely dependent on the lender, your lender may offer a repayment plan that extends the length of your loan while lowering payment amounts.

Create a Budget

The best way to manage your money and pay off your loan is by budgeting. Only borrow what you know you can pay back without going into debt. Calculate your monthly payments with your expenses and see how much you have left over. Any residual can be added each month to pay off your loan early.

Paying off your loan early doesn’t need to be complicated. Create a budget that you can stick with, speak to your lender and look for ways to cut other expenses.

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