If you’re like most Americans, you’re carrying a large loan, such as a mortgage, auto loan or credit card debt. That means you’re looking at hundreds or thousands of dollars in interest payments over the life of your loan(s). There’s also the mental load of knowing you’ll be making payments on the loan for years to come.
Did you know that, with a carefully applied technique, you can pay off any kind of debt sooner than you thought possible? These tricks are light on your finances, but they can each make a big difference to the total interest you’ll pay over the life of the loan(s) and can shorten it/them, too.
Be sure to check with your lender before employing any approach, as some loans have penalties for making extra or early payments.
Make bi-weekly payments
Instead of making monthly payments toward your loan, submit half-payments every two weeks. Your payments will be applied more often, so less interest can accumulate. You’ll also be making 26 half-payments each year, which translates into an annual extra full payment, shortening the life of the loan by several months or years.
Round up your payments
Round up your monthly payments to the nearest $50 for shortening your loan. This small bump in your payments is large enough to knock a few months off the life of your loan and to save you a significant amount in interest.
Make one extra payment each year
If you can’t make bi-weekly payments, commit to just one extra payment a year. You’ll only feel the pinch once a year, and you’ll still shorten the life of your loan.
If interest rates have dropped since you took out your loan or your credit has improved, contact Acclaim Federal Credit Union to ask about refinancing. Refinancing makes the most sense if it can help you pay down the loan sooner. With a lower interest rate or payment, you may be able to easily afford shortening the life of your loan.
Boost your income
Cut the life of your loan short by earning more money and putting the extra income toward your loan. Consider selling stuff on Amazon, moonlighting as a consultant or taking on a side hustle for extra cash.