Though slavery as we know it was abolished a long time ago, there is a form of slavery which is holding a vast majority of the world captive. You're probably wondering what it is. It's a 4-letter word - debt. Debt is the modern day slavery. The moment you owe someone, your life belongs to that person. That's why it's important to pay off your debts as soon as possible. While being in debt is a form of bondage, the good news is that there is a way out of it.
Did you know that there are simple, but brilliant tricks which you can apply to reduce the burden of a loan? With a carefully applied technique, you can pay off your mortgage, auto loans, credit card debt and any other debt you're carrying, quicker than you thought possible. These tricks won't hurt your finances in any dramatic way, but they can make a big difference in the total interest you'll pay over the life of the loan and help you to become debt-free faster.
A note of caution: Always Check with your lender before employing any approach, as some loan types have penalties for making extra or early payments. Tips include;
1. Make bi-weekly payments
Instead of making monthly payments toward your loans, submit half-payments every two weeks. This will enable your payments to be applied more often, so that less interest can accrue. You'll make 26 half-payments each year, which translates into an extra full payment on the year, thereby shortening the life of the loan by several months or even years. If you choose this method with a 30-year mortgage, you can shorten it to 26 years!
2. Round up your monthly payments
Round up your monthly payments to the nearest $50 for an effortless way to shorten your loans. For example, if your auto loan cost you $220 each month, round that number up to $250. The difference is too small to significantly decrease your budget, but large enough to knock a few months off the life of your loans and save you a significant amount in interest. For a potentially even bigger impact, consider rounding up your payments to the nearest $100.
3. Make one extra payment each year
If the thought of bi-weekly payments seem doubting but you like the idea of making an additional payment each year, you can accomplish the same goal by committing to just one extra payment a year. This way, you'll only feel the squeeze once a year and it'll still shorten the life of your loan by several months, or even years.
4. Re-finance
One of the best ways to pay off your loan early is to re-finance. If interest rates have dropped since you took out your loan or your credit has improved dramatically, this can be a smart choice for you. It's important to note that refinancing makes the most sense if it can help you pay down the loan sooner. You can accomplish this by shortening the life of the loan, an option you may be able to afford easily with your lower interest rate.
5. Boost your Income and put all the extra money towards the loan
A great way to cut the life of your loan is to work on earning more money with the intention of making extra payments on your loan. Consider new channels of income, cutting your impulse purchases and putting saved money toward your loan, or taking on a side hustle on weekends or holidays for extra cash. Even a job that nets you an extra $200 a month can make a big difference in your loan.
You can succeed in paying off your loans by using one or more of these tricks to do it faster and pay less interest. You deserve to keep more of your money! We hope you were enriched by these tips. As usual SUBSCRIBE to our blog for more of such content. Thank you for reading and until next time, BESTech remains your BEST bet.