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4 Things You Can Do to Pay Your Loans Faster

Photo by Shane on Unsplash

Paying off your debts early is one of the best ways to save money in the long run. This is especially true if you’re planning to get another loan for something else. For many of us, being debt-free from hundreds or thousands of dollars is a big relief. The thought of having your debt-to-income ratio being constantly high is mentally stressful, which is why a lot of people want to be debt-free as soon as possible. In short, having debt is depressing.

There are multiple ways for you to reduce your debts gradually and get rid of them as quickly as you can. With these techniques, you can pay off mortgages, car loans, personal loans, etc., if you’re committed enough to follow them. And if you’re worried that these techniques will hurt your financial life in any way, don’t worry. 

But before you use any of these, you must first consult your lender about this, as some of these techniques can do you more harm than good if you don’t know how to use them. That said, here are some things you can do to get rid of your debts as fast as possible.

Pay More Than the Minimum

Whether you’re paying personal loans or mortgages, the best way to pay them off as quickly as you can is to pay more than the minimum each month. Doing so will not only save you more interest as time goes by, but it will also speed things up until you pay it all off. However, if you don’t know it yet, some lenders have prepayment penalties, which can add more to your balance.

You should check first if your lender has these penalties in place and see their rules about prepayment in general. If they don’t penalize you with sanctions and fees, then you’re good to go. Also, it’s best to keep track of your payment. You can use apps that help you keep track of all your loan repayments and other stuff.

Cut Down on Your Expenses

If you really want to pay off your debt as quickly as possible, then cutting down your expenses and saving the extra money for your repayments is one of the things that you should be doing. To do this, of course, you’re going to need to create a bare-bones budget that you can live off of. 

With this bare-bones budget, you can cut off as much as you can from your living expenses and increase the amount that you’re repaying every month. Of course, you need to be careful about this. Don’t overdo it because it can affect your health. Remember that this adaptation of the bare-bones budget is only temporary until you finally get rid of that debt.

One important aspect of budgeting is to get rid of the expenses that aren’t really needed in your daily life. For example, let’s say that you go to Starbucks every day to get a latte. Ask yourself these questions; “Do I really need to have a latte everyday from Starbucks?” or “Do I even need to drink coffee every day?” 

Remember, only include things that you can’t live without in your budget. Once you’ve paid your debt or are almost there already, you can then slowly go back to your usual lifestyle.

Negotiate for a Lower Interest

Of course, you can also ask for some help from your lender, especially if you know the person personally. Not only that but if you’ve been a good client for a long time now, you might be surprised at the lengths they’re willing to go to help you with your endeavor. Depending on your standing and balance, they can cut off a significant amount of interest they give you each month. 

With a lower interest rate, you can pay more for your balance rather than pay most of your monthly payments directly to the interest.

Settle on Which Debt You Want to Pay First

For some people, snowballing, the process of settling smaller debts first is a legit way of gaining momentum in your repayment and avoid having the small debts grow bigger over time. That makes sense, in fact. However, if you want to settle the big ones first, you can also do that. It all depends on your preferences, at the end of the day.

Conclusion

Getting rid of all your debts is a huge relief for your financial life. Not only that, it makes you more open to getting another loan for something else entirely. The techniques stated above are just some of the ways to make your repayment faster. Discipline and commitment are two of the most important things you should focus on when tackling your debt.

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