Ad Banner
Advertisement by Open Privilege

Tips for quicker personal loan payoff

Image Credits: UnsplashImage Credits: Unsplash
  • Making extra payments and utilizing existing equity can significantly reduce your loan term and interest paid.
  • Refinancing and bi-weekly payments are effective strategies to accelerate loan repayment.
  • Increasing your income and carefully managing your budget can free up additional funds for loan payments.

Paying off a personal loan faster is a goal many strive for, as it not only alleviates financial pressure but also saves money on interest. Here are some effective strategies to help you accelerate your personal loan repayment and achieve financial freedom sooner.

1. Make Extra Loan Payments

One of the simplest ways to pay off your personal loan faster is by making additional payments beyond your scheduled monthly installments. According to Bluebricks, "Repay your personal loan faster by making additional payments than the scheduled monthly instalments". This approach reduces the principal amount quicker, thereby decreasing the interest accrued over the loan term. Consider using work bonuses, tax refunds, or savings from lifestyle changes to make these extra payments.

2. Utilize Existing Equity

Leveraging assets you already possess can be a powerful tool in accelerating loan repayment. For instance, if you own a property that has appreciated in value, you might consider acquiring a home equity loan or establishing a line of credit using the equity in your property as collateral. This lump-sum payment can significantly reduce your loan principal, as highlighted by Bluebricks.

3. Examine Your Budget

A thorough review of your budget can reveal areas where you can cut expenses and allocate more funds towards your loan repayment. Simple changes like preparing home-cooked meals, avoiding impulse buys, and buying secondhand items can free up additional money for loan payments. This strategy doesn't require major lifestyle changes but rather a conscious effort to manage your finances more efficiently.

4. Gain Secondary Income Streams

Increasing your income can significantly boost your ability to make extra loan payments. Look for new job opportunities with higher pay or take on a side gig in your free time. Selling items you no longer need on platforms like Carousell or REFASH can also generate extra income. The key is to remain committed and disciplined, directing the extra income towards reducing your loan balance.

5. Refinancing Your Personal Loan

Refinancing your personal loan can be an effective strategy to pay it off faster. This involves obtaining a new loan with a lower interest rate to pay off your current loan. Refinancing enables you to reduce your interest expenses and expedite the repayment of your loan. If you have multiple personal loans, consolidating them into a single new loan may also help you settle the debt earlier.

6. Make Bi-Weekly Payments

Instead of making monthly payments, consider making half-payments every two weeks. This method results in 26 half-payments per year, equivalent to 13 full payments, thereby shortening the loan term. Horizon Federal Credit Union explains, "Your payments will be applied more often, so less interest can accrue".

7. Round Up Your Monthly Payments

Rounding up your monthly payments to the nearest $50 or $100 can also help you pay off your loan faster. For example, if your monthly payment is $220, rounding it up to $250 can make a significant difference over time without a substantial impact on your budget.

8. Consider the Impact on Your Credit Score

While paying off a personal loan early can save you money on interest, it's important to consider the potential impact on your credit score. As CNBC explains, "Paying off a personal loan early may shorten the account lifetime, which can impact your credit history length". However, the benefits of reducing your debt and saving on interest often outweigh this risk.

Ad Banner
Advertisement by Open Privilege
Loans United States
Image Credits: Unsplash
LoansJune 2, 2024 at 8:30:00 PM

How to persuade your fiancé to take out a loan for a big wedding

Planning a wedding is often a dream many have nurtured since childhood. The idea of a grand celebration, complete with a stunning venue,...

Loans
Image Credits: Unsplash
LoansMay 30, 2024 at 8:30:00 PM

Three scenarios where a personal loan can prevent further debt

In today's fast-paced world, financial stability can sometimes feel like a distant dream. Unexpected expenses can arise at any moment, leaving you scrambling...

Loans Singapore
Image Credits: Unsplash
LoansMay 30, 2024 at 6:30:00 PM

What is a licenced moneylender and what should you watch out for if you borrow from them?

In Singapore, licensed moneylenders provide a legal and regulated avenue for individuals seeking personal loans. These moneylenders operate under strict guidelines set by...

Loans
Image Credits: Unsplash
LoansMay 23, 2024 at 5:00:00 PM

Is a personal loan the right choice for college students?

The cost of a college education continues to rise, leaving many students and their families searching for viable ways to finance their academic...

Loans
Image Credits: Unsplash
LoansMay 23, 2024 at 4:00:00 PM

For what reasons could a personal loan be rejected?

Applying for a personal loan can be a crucial step in managing your finances, whether it's for consolidating debt, covering unexpected expenses, or...

Loans United States
Image Credits: Unsplash
LoansMay 22, 2024 at 6:30:00 AM

Jumbo Loans: What they are, how they work, and how to qualify

In the world of real estate, the term "jumbo loan" often surfaces, especially when discussing high-value properties. As housing prices continue to rise,...

Loans United States
Image Credits: Unsplash
LoansApril 12, 2024 at 12:00:00 PM

Why investors are banking on prolonged high interest rates in the loan market

In recent months, loan investors have been making significant gains by betting that interest rates will stay high for a longer period. This...

Loans Singapore
Image Credits: Unsplash
LoansFebruary 3, 2024 at 6:20:00 PM

How Singapore's SME Working Capital Loan Can Help Your Business

In the unpredictable world of business, the COVID-19 pandemic has underscored the critical importance of cash flow and liquidity. For SMEs, balancing the...

Loans Singapore
Image Credits: Unsplash
LoansOctober 15, 2023 at 3:35:00 PM

Unsecured Loans: What You Need to Know Before Borrowing

Debt can be a double-edged sword. While it may sometimes arise from unsustainable lifestyle choices or unforeseen circumstances, it also has the potential...

Ad Banner
Advertisement by Open Privilege
Load More
Ad Banner
Advertisement by Open Privilege