Paying off a personal loan quickly can be smart.
You might put extra cash towards the principal, pay more each month or switch to biweekly payments.
While getting rid of debt is usually wise, sometimes it’s better to focus on higher-interest debts like credit cards first.
Many Americans take huge loans, from credit card debt to mortgages and car payments which leads to significant interest over time and a heavy mental burden.
However, there are ways to reduce this burden without major financial stress.
By employing strategic methods you can lower the total interest paid and speed up the journey to being debt-free.
This approach not only saves money but also allows for financial freedom and the ability to spend on things you enjoy.
Let’s get started.
11 Ways to Pay Off Your Personal Loan Faster
1. Increase Monthly Payments
Simply rounding up your payments can have a big impact.
Upping a $220 payment to $250 or even $300, can shave months off your loan and save on interest without heavily impacting your budget.
2. Biweekly Payments Strategy
Switching to biweekly payments can shorten your loan term. If you’re paid biweekly, this aligns perfectly with your income schedule.
For instance, paying $100 every two weeks instead of $200 monthly adds up to an extra month’s payment yearly, reducing interest and loan duration.
3. Annual Extra Payment
If biweekly payments seem daunting, consider making an extra payment annually.
This can be from a bonus, tax refund or by adding a small amount to your regular payments throughout the year.
Even irregular extra payments can significantly reduce your loan term.
4. Refinancing
Refinancing can be a great option if interest rates have dropped or your credit has improved.
It can allow you to pay off your loan faster by either reducing the term or maintaining the term but using saved funds to make extra payments.
However, ensure refinancing actually lowers your interest rate and doesn’t extend your loan term unnecessarily.
5. Budgeting for Extra Payments
Reviewing your budget can reveal unnecessary expenses.
Eliminating these can free up funds for additional loan payments.
Budgeting apps can also be handy in strategizing your savings and spending.
6. Increase Your Income
Boosting your income through side gigs, selling items online or cutting unnecessary spending can significantly speed up loan repayment.
Even an extra $200 monthly can make a substantial difference in reducing your loan term and saving on interest.
7. Leverage 0% APR Balance Transfers
For those with good credit, a 0% APR balance transfer to a new credit card can be a strategic move.
Make sure you can pay off the transferred amount before the promotional period ends to avoid high interest rates later.
8. Sell Unwanted Items
Selling items you no longer need, from high-value goods like electronics to everyday items through garage sales or online marketplaces, can provide a quick cash boost to apply toward your loan.
9. Cancel Unused Subscriptions
Review your bank statements for unused or unnecessary subscriptions.
Canceling or downgrading these can free up money to contribute towards your loan repayment.
10. Compare Insurance Quotes
Shopping around for insurance can uncover potential savings, especially if your credit score has improved or if different insurers offer better rates.
Redirect any savings towards paying off your debt.
11. Smart Spending Cuts
Analyzing your spending for potential cuts, such as cooking at home more often, pausing new clothes purchases and hosting friends instead of going out, can free up funds for loan repayment.
Remember to balance savings with enjoying life to stay motivated on your debt payoff journey.
So these were some of the steps you can take to pay off your personal loan faster.
