Pay-off of student loans may take several years but by adopting the proper strategies borrowers are able to repay their debt within a shorter span of time while saving interest payments Early pay-off not only yields financial independence but also reduces the long term expenditure This article delves into useful methods of quickly and effectively pay-off of student loans
Why Paying Off Student Loans Early Is Good
Pay-off of student loans quicker has a number of benefits that include
Save money on total interest costs The faster a loan is repaid the less interest paid
Less financial stress Being debt-free means improved budgeting
Better credit score Paying on time and paying down debt improves creditworthiness
Increased financial freedom Unencumbered income can be put toward savings investments or large purchases
Paying off Student Loans Quickly
1 Pay More Than the Minimum
Paying more than the required monthly payment helps reduce the principal balance and cuts down on interest over time
How to Do It
Round up payments to the nearest fifty or hundred dollars each month
Make extra lump sum payments when possible
Specify that additional payments go toward the principal balance to maximize savings
2 Refinance Student Loans for a Lower Interest Rate
Refinancing student loans can reduce interest rates and lower monthly payments making it simple to pay off debt quicker
Who Needs to Refinance
Individuals with solid credit scores and steady income
Individuals with high interest private student loans
Graduates who no longer require federal loan advantages such as income driven repayment or forgiveness initiatives
How to Refinance
Compare rates from several lenders
Select between fixed and variable rate selections
Apply with a creditworthy co signer if necessary to qualify for lower rates
3 Make Biweekly Payments Rather Than Monthly Payments
Dividing monthly payments into two smaller biweekly payments means one additional payment a year lowers interest charges and shortens the loan term
How It Works
Rather than paying twelve monthly payments a year make twenty six half payments
Eventually this additional payment will pay off the loan earlier
4 Utilize Windfalls and Additional Income Towards Loans
Putting unexpected funds like tax refunds work bonuses or gifts straight onto student loans can help pay off debt much quicker
Sources of Additional Income
Tax refund annually
Work performance bonuses
Freelance or side job income
Selling items no longer needed for additional funds
5 Leverage Employer Student Loan Benefits
A few employers provide student loan repayment benefits as part of their compensation package
How to Qualify
Verify that your employer offers student loan repayment help
Qualify under requirements like job position or company tenure
Make additional payments to the principal amount
6 Sign up for Auto Pay to receive Interest Rate Discounts
Numerous lenders grant interest rate discounts to borrowers who sign up for automatic payments This is a money-saving option and a guarantee of timely payments
Advantages of Auto Pay
Reduces interest rate by as much as 0.25 percent with certain lenders
Avoids late charges and payment default
Maintains good credit rating
7 Save Money and Put Savings towards Loans
Cutting back on discretionary expenses allows more to be saved and put towards student loans
How to Cut Expenses
Prepare meals at home rather than dining out
Take public transit rather than drive
Cancel unused memberships and subscriptions
Shop for bargains and use student discounts where available
8 Get a Side Job or Freelance Employment
Getting additional income from part time employment or freelance work may assist in clearing student loans early
Best Side Jobs for Supplemental Income
Freelance writing graphic design or virtual assistance
Online tutoring or teaching English
Rideshare driving or food delivery
Selling digital or handmade goods online
9 Refrain from Extending Repayment Periods
Opting for extended repayment plans can decrease monthly payments but raises the long term interest paid Instead of breaking payments over a long period focus on repaying the loan at the earliest opportunity
When Not to Use Extended Repayment
If you can pay more today
If paying more interest in the long term is substantially more
If accelerated repayment is suitable for long term financial objectives
10 Stay Motivated and Track Progress
Having specific financial objectives and monitoring progress can keep one motivated to pay off student loans ahead of schedule
How to Remain on Track
Utilize budgeting apps to track payments and loan balances
Create milestones for debt reduction such as paying 5000 or 10000 at a time
Reward oneself when achieving financial objectives to stay motivated
Final Thoughts
Sustained discipline strategic planning and smart financial choices are needed to repay student loans ahead of schedule Making extra payments refinancing at better rates utilizing windfalls effectively cutting down on wasteful expenses can cut the repayment period substantially The earlier loans are repaid the sooner borrowers are free from their financial burdens and can concentrate on long-term financial objectives