You can save a lot of money by paying off debts quickly. For many people, the motivation is there and they understand why it’s important to get rid of debt – it’s just a matter of logistics.
What does it take to pay off your loans? There are several simple methods and these are explained below. Before you choose, make sure you understand how to pay off your debts early on from any specific lender you use.
There may be fees or specific steps required for that lender to properly lend things.
Does it make sense to pay your debt early?
Sometimes it’s a great idea to pay off debt and sometimes it’s better options. Research the pros and cons and then make an informed decision:
- Pros: Why Pay Loans
- The bad: pay wounds
It is always a good idea to run some numbers and figure out how much you will save (and maybe get more motivated). See how things will work with a loan amortization calculator, use pre-built Excel loan calculators, or calculate loans yourself.
Just send the money
The easiest way to pay off your debt early is to pay a little (or a lot) extra whenever you can. It is also the hardest to give up because it requires discipline. You might want to consider using one of the automated techniques below if you don’t think you’ll stick to the program.
If you like to fly past the seat of your pants – and you are sure you can pay your debts – just send in an extra payment.
Include a note with your check saying ‘Receive to Main’. That way, your lenders won’t be confused; they will know that you are trying to pay extra, and they can contact you if anything needs to be done differently.
One extra payment
You will pay off your debts faster by adding additional monthly payments each year.
If the monthly payment is $ 1200, then pay an additional $ 1200 sometime during the year. You can use the money from tax refunds or bonuses.
If you’re like most people, it’s hard to make up for the extra payment. An alternative is to spread compensation throughout the year. Divide your monthly payment by 12 and add that amount to each monthly payment. Your $ 1200 payment will be $ 1300 (1200 divided by 12 equals 100; 100 plus 1200 equals 1300).
Pay off debt with two weeks’ pay
You can also pay every week instead of every month. You will eventually make the equivalent of one additional mortgage payment each year.
When you pay off debt with a two-week payout, you should not see dramatic changes in your monthly expenses. However, you will see dramatic savings as you pay down debt over the years.
Loans Debt repayment programs
Your lender may have several options to help you pay off your debt faster. These programs may require that you pay extra fees, so be careful. If it’s worth it, go ahead and pay the fees.
If you don’t like fees, find a way to pay extra, and avoid fees. You can set up automatic monthly payments on your bank’s online payment system.
Make sure the checks include a note marked “Apply to Head” in the Memo line.
Other companies besides your lender will also be happy to pay for your debt repayment program. They sell software and systems to solve everything for you (or at least tell you what to do).
You usually do not need these services unless they help resolve discipline issues. If you don’t otherwise, do whatever works – but make sure you save more than you spend.