If you’re like most Americans, you probably owe money on multiple loans. Whether it’s credit card debt, a mortgage or a car loan, loan debt is part of your life. And that means you’re looking at hundreds or thousands of dollars in interest over the life of the loan. There’s also the mental load of knowing you’ll be paying on the debt for years to come.
Did you know there are simple tricks you can try to lighten the load? With a carefully applied technique, you can pay off your mortgage, auto loan, credit card debt and any other debt you’re carrying sooner than you thought possible. These tricks are light on your finances, but they can make a big difference to the total interest you’ll pay over the life of the loan and get you debt-free faster.
Make bi-weekly payments
Instead of making monthly payments on a loan, do half-payments every two weeks. This way, your payments will be applied more often so less interest can accrue. 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 even years.
Make one extra payment each year
If you can’t make bi-weekly payments, but you like the idea of an extra yearly payment, accomplish the same goal by committing to just one more payment during the year. You’ll only feel the squeeze once (tax or bonus time, perhaps) and you’ll still shorten the life of the loan.
You can also spread that extra payment throughout the year. Divide your monthly payment by 12 and then add that cost to your payments all year long. You’ll be making an extra payment while hardly feeling the pinch.
Round up your payments
Round up your monthly payments to the nearest $50 to shorten your loan. The difference is usually too small to make a tangible dent in your budget, but large enough to knock a few months off the life of the loan and save significantly in interest.
Refinancing makes the most sense if it can help you pay down the loan sooner. With a lower interest rate, you should easily be able to afford shortening the life of the loan.
Boost your income
Cut the life of your loan short by earning more money and putting the extra cash towards your loan. Consider selling stuff on Amazon, moonlighting as a consultant or taking on a side hustle.
Before you decide to try any of these approaches, check with your lender first as some loans may have penalties for making extra payments or paying the loan off early.