Student loans have a maximum term of ten years. However, some people manage to pay their loans off before reaching the tenth year. You should make it a goal to pay off your financial obligations as fast as you can. That way, you will be free from the burden, and at the same time, you’ll save money.
It is easy to pay back your outstanding balance within ten years. You just need to learn good financial practices and use them in your life. Even if you think it’s impossible to get rid of your student loans today, there are means that can help alleviate your burden and enjoy better fiscal health.
Start a Budget and Stay on It
Getting rid of debt should start with creating a budget. Maintain a budget that allows you to have enough funds to enjoy and continue your current lifestyle. It is important to avoid splurging on food or buying the latest smartphone until the time comes when you’ve paid off the loan.
The budget must not be complicated. There’s no correct way of doing a budget, so you should look for a method that works for you. Avoid buying unnecessary things that you will only enjoy in the short term.
The debt accrued throughout college can become a financial black hole, especially if you have an irregular income. Repaying that off as fast as possible will save you lots of money, which you can then use to buy what you want for yourself. Until then, you should live a frugal life.
Pay Extra Installments
One way to repay a bad credit loan faster is to make extra installment payments. If you have this type of that loan doesn’t have prepayment penalties, you can do extra payments anytime you want. For instance, you can consider making an extra payment once every two to three months if money is available. That way, you increase the total payments made each year and decrease the amount you owe.
Before you make extra payments, though, you should first contact the loan provider in writing and state that you are going to pay in advance by doing additional payments. You should specify that you want to apply the extra amount paid to the principal balance, not to the next monthly installment. In this way, you will reduce the accumulated interest on your debt.
If you don’t contact the lender in writing, the company might hold the extra amount and apply it to the next installment, which means that you are not reducing the amount of the balance but are still paying more interest.
Pay More than the Minimum Repayment Amount
Another way to pay back student loans in less than ten years is to pay extra each month. Using this method will reduce the debt balance faster, and, therefore, you pay less interest.
Just like the previous tip, you should notify the lender of your intention. The lender might just hold onto the additional amount and apply it to the next installment if you don’t explain how you want the additional amount used.
Create a College Repayment Fund
Moving money automatically into savings is another effective way of paying off your debt in less than ten years. You can set aside the money to grow, instead of using it on dining out or clothes.
When you set up an account, make sure that you will be using it to pay for the student loan. Don’t use an existing account that you have set aside for something else. Look for a savings account offering a high yield in order to maximize your repayment fund.
Automate Monthly Payments
You can also get out of debt if you automate your payment scheme. This technique helps develop the good habit of paying your debt regularly each month. If you get paid twice a month, you could consider splitting your regular payments in half, which cuts down on the interest you owe.
People receiving their paychecks every other week get 26 paychecks every year, which amounts to two extra paydays than the monthly payments required for the loan. You would be making an extra month of payment every year. While it will not reduce your loan in half, paying extra will greatly help in getting you out of your debt early.
Refinance the Student Loan
One of the best ways to reduce the interest rate on your debt is through refinancing. This process allows you to pay back your existing loan and then gets you a new one with a lower interest rate. Some private lenders offer low-interest rates, as compared to in-school and federal student loans.
When you refinance your loan, you can choose between variable and fixed rates. Loan terms are from five to 20 years. It will certainly make it easier for you to repay your debt if the rates are lower.
Keep in mind that lenders have their own qualifications for giving out loans that include monthly free cash flow, steady income, and credit rating. To improve your chances of qualifying for refinancing, apply to several lenders at the same time.
Get a Part-Time Job in College
You should think ahead if you want to get out of your student loan in less than ten years. While you are still in school, you should consider a part-time job, but only as long as you can balance it with your academics. A part-time job can help offset your student loan. Just make sure you don’t waste your paycheck partying on weekends.
These are a few easy ways to pay back your student loans in less than ten years. You should set your mind toward paying off your debt as soon as possible, and you will achieve it in no time. Don’t lose focus, and just keep in mind that the sooner you are out of debt, the better your financial future will be.