Paying off your personal loans quickly reduces your monthly debt, frees up more money for you and your family, and helps make you eligible for other loans. To put it simply, the less debt you have, the more money you have in your pocket. Paying off loans quickly takes planning and determination. Here are a few steps for paying off your loans quickly and getting you and your family debt-free.
1.) Make sure there is no prepayment penalty: Some lenders will charge you a penalty for paying off a loan early. It’s best to call ahead to find out if you will be charged more for paying off your loan sooner than anticipated.
2.) Set up a budget: After you’ve found out you can pay off your loan early, the next step should be to set up a monthly budget for your household. This is a key factor in determining exactly how much you can afford to pay every month and still have enough money to cover the rest of your expenses.
3.) Create a debt repayment plan: Now that you know the monthly payment you can afford, determine a realistic timeframe for paying off the loan in full. You may find that you might not have to max out your budget to meet your goal!
4.) Cut expenses: When setting up your family’s budget, it’s easy to focus on regular monthly payments and ignore other expenses such as eating out, haircuts, and groceries. The easiest way to free up extra cash is to eliminate or at least reduce your expenses: skip eating out, clip coupons, cut or reduce expensive cable and cell phone packages.
5.) Set a schedule of repayment: Now that you’ve cut some of your expenses and created a debt repayment plan, it’s time to create your schedule of repayment. Setting the schedule is the easy part; it’s up to you to stick to the plan each month to make sure you reach your goal of becoming debt-free.
6.) Automate your debt payments: It’s easy to let a payment slip through the cracks. Thankfully, many lenders have automated payment plans where your monthly payment can be automatically withdrawn from your checking or savings account. In some cases, such as with student loans, setting up automatic payments can actually reduce your interest rate.
7.) Stick to your plan: setting up a budget, cutting expenses, and creating a schedule of repayment are important steps towards reducing your debt. In order to make sure you’re reaching your goal of being debt-free, you need to stick to your plan each and every month. Make sure you aren’t letting unnecessary expenses creep back into your budget, and stay on top of your monthly payments. While it may seem like a lot of work now, the end result will give you peace of mind for the future.