Strategies to repay a loan faster

December 01, 2017
How can you speed up your loan repayment? It might seem impossible to pay more than the minimum amount on your credit card balance, auto loan, personal loan or mortgage. Yes, you should at least try to maintain your personal finances so that you can make these necessary minimum payments and keep from falling behind on your debts.
Strategies to repay a loan faster

At the same time, it may not be as complicated or difficult as you think to get ahead of your debt payments. No, you will most likely not be able to pay off all your loans tomorrow, but you can get ahead of the payments and finish paying off the loans several months (or years, in the case of a home mortgage) early.

Here are four strategies for paying your loans faster.

  • Pay half the monthly amount every two weeks. This strategy takes a little math to understand. Basically, you divide the monthly payment in half and pay half every two weeks. There are 52 weeks in a year, so that is 26 half-payments or 13 full payments per year. If you just paid at the end of every month on the due date, you would only make 12 full payments per year. Even if the loan term is only two years, you can get ahead of your payments with this strategy.
  • Round up payments to get ahead. This is another option that can help you take small monthly steps that will help you get ahead of your payments. If your loan payment is $175, for example, you could round the payment up to $200. This does not seem like a lot but it would translate into an extra month worth of payments every seven months. So in two years, you would be ahead by three monthly payments.
  • Save to make an extra payment. Perhaps paying every two weeks or rounding up does not seem like something you can do month after month. Another option is to make one extra payment when you have the money. Perhaps you get money for your birthday or you get a bonus during the holidays from work. You can use this money to make an extra payment and get the same results as you would get if you followed one of the previous two strategies.
  • Don’t get large loans in the first place. If you only need a few hundred dollars, you should not opt to get a credit card or a large personal loan from a bank. Instead, look for an online personal loan. These loans are only for a few hundred dollars, but if that is all you need, why risk going into credit card debt or getting a personal loan for more than you really need?

These strategies will not help you pay off your debts overnight, but they can get you ahead of your payments so that you can pay off your debts earlier and have a one-month safety net in case you need to skip a payment.