Personal loans can be of great help during times of financial hardships. These loans provide flexibility and ease of repayment to meet specific expenses. While these loans are easy to get even with a fair credit score, the repayment can sometimes be difficult for certain people.
It may be due to multiple circumstances, including but not limited to the size of debt, weak financial condition, and sudden loss of job.
Even if that’s not the case with you and you simply want to pay off your personal loan faster, we have come up with the top 5 ways you can do so.
Keep reading to find out how to expedite the loan repayment process.
1. Understand Your Loan Terms
Your loan terms will determine how early or late you need to finish paying all the installments of your loan. However, if you haven’t read those requirements and don’t know if you can pay off your loan faster, it is recommended to go and read those terms.
Try to understand the interest rate, repayment schedule, and any prepayment penalties or perks you can enjoy. Knowing this will let you create the foundation for your loan repayment plan. This should be done when you are availing a personal loan.
You can go to Lantern by SoFi to compare loans from multiple lenders and the terms they are offering. This way, you will be able to choose a loan that provides certain perks in terms of interest rate and collateral when you agree to pay early.
2. Create a Budget
Creating a budget is the most important thing you will need to do if you want to pay off your personal loan fast. Start by assessing your current financial situation. Create a detailed budget that outlines your monthly income, essential expenses, and any additional spending.
Identifying areas where you can cut back will free up additional funds for loan repayment. While doing this, make sure to save the extra funds, including tax refunds, work bonuses, or gifts. These things can be very helpful for paying off your personal loan faster.
3. Make Biweekly Payments
The traditional payment schedule for all types of loans is on a monthly basis. However, it’s not written anywhere that you can only make monthly payments. You can easily consider making half of your monthly payment every two weeks.
This results in 26 half-payments or 13 full payments over the course of a year. This effectively creates an extra month’s worth of payments. By paying your installments this way, you can speed up the payment schedule and reduce the overall interest paid over the life of the loan.
4. Round Up Your Payments
Personal loan installments are not always rounded up. For example, your monthly installment for a personal loan can be something like $568 or any random number like that. What you need to do is round up your monthly payments.
For example, if your monthly installment is $375, consider rounding it up to $400 or even $500. The additional amount might seem small, but over time, it can lead to considerable savings on interest and help pay down the loan amount faster.
5. Consider Refinancing
Refinancing is a great option for paying off high-interest loans. Refinancing lets you take out a new low-interest loan to pay off your current loan. If you are currently paying a high interest rate on your personal loan, you can make the installments easy for yourself by finding refinancing options.
Look for lenders offering lower interest rates and favorable terms. Refinancing can result in lower monthly payments or a shorter repayment period, both of which can result in faster loan payoff.