How to Pay Off a Personal Loan Fast
While getting your hands on a loan can happen within minutes, paying it back often takes longer. Paying off your loan as fast as possible helps you manage your finances, and lowers the amount of interest you end up paying during the life of the loan.
To help you speed up the process of becoming debt-free, here are our tips on paying off a personal loan as soon as possible.
What is a personal loan?
Whether you need to borrow money for a new car or pay for house renovations, any loan that is for individual use is called a personal loan. This money is borrowed from a bank, online lender, or credit union and will need to be paid back over a set period.
Compared to other loans, such as mortgages, personal loans are often much quicker to pay back. Instead, of spending 10-30 years paying off a mortgage, you typically will repay a personal loan monthly for one to five years. With our tips, however, you’ll soon see that repayment period become even smaller.
How do I pay off a personal loan quickly?
While paying off a personal loan early may be difficult, there are various ways to help you pay it back quickly. While you may not be able to implement all of the following tips, giving one or two of them a try may be the key to helping you manage your debt. Before doing so however, check with your loan provider to make sure there aren’t any penalties involved with making early repayments. QuickCash don’t charge any early repayment fees, allowing you to repay your loan in full, at any time.
Rounding up your payment
Many people find that an easy way to back your lender more quickly is by rounding up the payments. For instance, if you usually pay $280 a month, rounding it up to $300 will soon help the total owed become a lot less. Even if it’s just an extra $5 or $10, that additional amount can help you shorten your payback period and save you money by reducing interest on your loan.
Making bi-weekly payments
Another option to pay back a personal loan faster is by making bi-weekly payments. By submitting half the payment every two weeks instead of the full amount monthly, you can sometimes end up paying less interest.
Make one additional payment
If paying every two weeks rather than monthly isn’t feasible for you, you’ll find that you can achieve a similar result from making one extra payment each year. If you come into any extra money from things like tax refunds or a work bonus, it can be helpful to use this as an additional payment on your loan.
Earn some extra cash
Paying back your loan will become a lot easier if you have more money. You can sell old clothes, books, and other items online or pick up some extra shifts. The more money you have available to make payments, the quicker you’ll become debt-free. Nowadays, there are even options to get some extra cash by doing online surveys such as those on New Zealand’s Survey Compare site, or by doing freelance work such as data entry on Freelancer.com.
Cut unnecessary expenses
Cutting unnecessary costs can also be a good idea when it comes to paying back your loan quickly. From taking a packed lunch instead of buying food, or doing free activities on the weekend instead of paying to go out. Being mindful of your purchases will help you become debt-free a lot faster.
If you’re having difficulty with managing your funds, read our article: “Tips for Budgeting and Saving Money“.
Avoid skipping payments
Skipping payments on your loan is only going to cost you more in the long run. Not only will you likely incur late fees, but this will only increase the length of your loan and cost you more in interest. Setting up automatic payments can help you avoid late payments, and sticking to your budget will help ensure you always have the repayment amount ready.
Read our tips on managing your finances.
Why should I pay off my personal loan as soon as possible?
Paying off your personal loan quickly will ultimately decrease the length of your loan and save you money on interest. You’ll also feel a huge sigh of relief as you no longer have to stress about budgeting in your monthly repayments.
Not having to worry about paying back your personal loan also means you can start saving for the future. That money you once had to give back to a lender can now be put towards buying a house or saving for retirement.
Once you start to save up more money, you’ll become much more attractive to lenders as your debt to income ratio improves. This ratio looks at how much of your monthly income goes towards paying debts, with fewer debts you have, the more confident a lender can be that you’ll pay them back.
Similarly, paying off your personal loan as soon as possible will help to improve your credit score. Having a better score will once again make it easier for you to borrow money in the future.
Is it bad to pay off a personal loan early?
Some lenders penalise you for paying off your loan early as a way to earn back some of the interest they would have otherwise received from the full-length of the loan. Lenders will have had to state in the contract whether or not these fees will apply. Therefore, before paying back your loan early, look in your agreement to see if any of these charges appear.
At QuickCash, there are no fees for early repayment, so you’ll save money on interest by paying off your personal loan quickly.
We understand that paying back your personal loan can sometimes seem like a never-ending task, with the idea of paying it back early being even more daunting. We hope that with these tips, you’re now feeling less stressed and more empowered to take control of your financial situation.
If you have any questions about this article, or about personal loans in general, feel free to call us on 0800 784 252.
Disclaimer: This article is intended to provide general information only. It does not take into account your financial needs or personal circumstances. It is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.