These days, it’s relatively common to owe on a mid-to-large-sized loan, and studies have shown that more than half of all Americans have taken out a loan to which they still owe quite a bit of money. After all, especially in the 21st century, taking out a loan is almost a big part of being an adult. Whether you’ve taken out a home equity loan, student loans, or an auto loan, these days it is almost a necessity if you need to make large purchases or help get from one point to another, financially.
Paying off loans can take time and can definitely feel tedious as you make payments every month, especially when you consider the interest that builds up the longer, you’re paying on that loan. However, there are simple tricks that can enable you to pay off your loans faster than you may not have considered. As always, if you have questions about these tips, feel free to contact your lender or reach out to one of our loan officers.
- Take what you pay monthly and round up. If you’re looking for an easier way to shorten the length of your loan, round up your monthly payments to the nearest $50. As an example, if your monthly student loan payment comes out to $325 a month, pay $350 instead. That extra $25 won’t break you for the month, but incrementally, those rounded-up payments will meld into your monthly budget and you won’t know the difference — all you’ll see is your loan being paid off faster each month.
- Start making bi-weekly payments. Submitting two bi-weekly payments a month as opposed to one big monthly payment has its advantages. For one, there will be more payment activity on your account, allowing less interest to accrue, and we all know that interest can be brutal when it comes to completely paying off loans. Also, making 26 half-payments during the year translates into one extra payment in full on the year, which helps decrease the life of your loan by months, perhaps even years.
- Go a step further — make an extra payment every year. This can be done aside from or in tandem with making bi-weekly payments; in fact, considering that making those bi-weekly payments contributes to an extra payment every year, this can only add to that. By committing to make an extra payment every year, whether you do it in one payment or spread it out throughout the year, you’ll be taking months off what you owe.