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May 25, 2021 Personal Finance

Pay Off Your Loan Faster (Or Get Caught Up)

Want to pay off your loans faster? Or catch up on loan payments that have fallen behind? Well, you’re not alone. A 2020 Bankrate study put Americans’ collective debt at $14.2 trillion, which averages out to about $92,000 of personal debt for each American — and it continues to rise.

About 75% of adults carry a credit card balance and the average balance for student loan debt hovers around $38,000. Around 80% of Americans have collected debt from various outlets.

The weight of numerous loans can make it seem like you’ll never be free from the monthly payments or interest charges. True financial growth begins when you can focus on saving and investing in your future and stop paying for past purchases plus interest.

Here are a few proven ways to pay off your loan faster or get caught up on your monthly payments for an outstanding loan. Implement these ideas into your financial life, and you’ll start seeing lower totals on what you owe, which eventually will lead to higher totals for what you have.

Round Up Your Loan Payments

When making monthly payments, round up the amount owed to the nearest amount you can afford. If your monthly car payment is $323, try rounding up to $350.

If you have more flexibility in your budget, consider raising it more. You’ll save money on additional interest and shorten the life of your loan before you know it.

Cut Your Loan Payments in Half, But Pay Them Every Other Week

Bi-weekly, every other week, payments will ensure you are never late on a loan payment, and it will add in an entire extra loan payment each year.

Be sure your loan agreement allows for this kind of payment, that you’re up to date on your loan, and that you will remember to pay each payment every other week. In the long term, bi-weekly payments will shorten the length of your loan.

Refinance Your Loans

Paying high-interest rates often slows progress on paying off the loan principal. By lowering your interest rates, you can often lower your monthly payment, save on interest, and pay off your loan faster than the original terms.

Meet with your financial advisor or loan officer to go over options on what loans you could refinance. Current auto and mortgage loan rates are frequently lower than when you originally took out the loan.

Consolidate Your Loans

The different payment amounts, due dates, and interest rates on numerous debt accounts can be difficult to manage. Consider combining several debt accounts into one loan. Commonly referred to as a debt consolidation loan, it may lower the overall interest paid on other loans.

In the long run, a debt consolidation loan can help to pay off creditors while also improving your credit. Work with a trusted financial advisor or loan officer to avoid a higher cost than your original payments and interest rates. Some companies may try to take advantage of you by adding a fee for their help that will only cause more stress to your wallet.

Put All Extra Cash Towards Your Loan Payments

Take any extra cash – even $10 or $20 dollars makes a difference – and put it towards your smallest loan balance. Have a weekend garage sale or sell things online. Exchange clothes for cash from a local consignment shop. Pick up more shifts at work or get a side job. Trim back on unnecessary expenses.

Then, take the money and put it towards paying down your loans. Soon, that extra cash can go to growing your future savings instead of paying off debt.

Some of these steps you can take yourself, but a few of them require the guidance of a trusted financial advisor or loan officer. Talk through your options with your advisor and see how you can start paying off your loans faster so you can save more money for your future.

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This article is for educational purposes only. WeStreet makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.