Since loans charge interest, the faster you pay back the amount you borrowed, the less the loan ends up costing you (unless its terms include a penalty for paying early). Follow these strategies to pay off your loan in a flash.
Do the Math
Do a little figuring to see how much you’d save in interest payments if you paid off the loan one year, five years or 10 years before its term is up. The results – even for the one-year plan – are sure to inspire you.
Add Some Extra
The easiest way to pay off a loan ahead of its term is by paying extra – each month or as you can. Try these tricks for finding that additional money and putting it toward your loan.
- Round up the amount of your current payment to the next $100 and make that your new number.
- Make bi-weekly, instead of monthly, payments. This will lower the amount you pay in interest (since your payments are applied more often), and you’ll end up making one extra payment for the year.
- Pick a month to double your payment (resulting in one extra full payment for the year). Choose a month when you don’t have too many other big expenditures eating away at your budget. (December would be a bad choice!)
- Make more money. If you have things just sitting in a closet or under a bed (rugs, lamps, framed art, collectibles) that you’re no longer using but are in good condition, consider putting them up for sale online. Ebay is a great choice, but check into local facebook groups too. They usually take a smaller percentage of your sale, and since you’re selling to people near you, you won’t have to deal with shipping. Put any proceeds toward paying off your loan.
- Refinance your loan. This only makes sense if the interest rate is lower and is low enough to offset any closing costs that come with starting a new loan, so make sure you do your homework.
- Open a MAX Club Account as a “pay-down-debt” fund and deposit any “extra” income: bonuses, proceeds from garage or e-bay sales, tax refunds, etc. Once you’ve got a good amount saved, put the money toward your loan. When you open a Club Account, you can also choose to have a small amount of each paycheck automatically drafted to that account. Using this method of “forced saving” removes the temptation to spend that money elsewhere.