For most people, deciding to apply for a loan is a fairly simple task. However, when it comes to paying the loans, not many are as conscious of the fact that they are in debt, let alone being diligent in settling the loan.
Depending on the kind of loan you have, paying it back can take an entire decade! No matter how deep in debt you are, there is always a way out. Fortunately, you can use the following strategies on how to pay off loans quickly:
1. List All Your Debts
Doing this is a tough thing to do, especially if you have multiple debts. For instance, you might have to take out a payday loan to pay for medical bills or pay off your credit card.
Listing your debt is crucial as it helps you keep track of all outstanding balances. Clearly outline the type of loan you have, the lender, how much you owe, the interest rate on each loan, the minimum amount payable, and the date the payment is due.
You can create this list using pen and paper or the Google Sheets tool. Having a list of all of your debts not only helps you look at your debt in totality, but it also allows you to plot out the best way to pay it.
2. Pay the Minimum (At Least) on Every Loan
Regardless of the number of loans you have, always make the minimum payment on every loan or credit card to avoid hurting your credit score and incurring late fee charges. If you have extra money, top up your minimum payments and gradually start clearing your debt.
You can do this by rounding off your monthly payments to the nearest $50 or $100. Also, should you get more funds, from overtime for example, use it to pay off your high-interest debts to speed up your repayment process and save you money on interest.
3. Avoid Taking on More Debt
A useful tip on how to pay off loans quickly is to avoid taking on more debts. As tempting as it may be, avoid taking on more debt. If this means you have to intentionally “misplace” your credit cards to avoid using them, do so.
Taking on more debts compounds your situation and makes it harder to clear the debts you already have. Avoid new loans like you would a plague unless you need one, you honestly have no alternative, or you are sure you will pay off the balance at the end of the month.
Consolidation means combining all your previous outstanding debts from multiple credit cards and lenders into one single debt. Doing this allows you to easily manage your debt since you only have to make a single payment each month. You are also likely to attract lower interest rates on your loan. Debt consolidation helps you cut costs and reduce the time it takes to repay the loan.
5. Get a Side Hustle
One of the best ways to supplement your income is by getting a side hustle. Instead of spending your free time watching TV or going out with friends, find something profitable to do.
While you may feel exhausted working two or three jobs, it is definitely worth the sacrifice when you’re in debt. You could also try monetizing whatever talent or skill you have. It could be drawing, dancing, comedy, or singing. Other ideas to consider include babysitting, mowing lawns, cleaning houses, or anything else you are good at. Use whatever proceeds you get from your side hustle to pay off the loans.
6. Live on a Bare-bones Budget
To pay off your loans quickly, live within your means. Take a close look at your budget and identify the must-haves. Going out for dinner or lunch with friends, and having cable television and Netflix are some of the “unnecessary” expenses you may want to prune. You can survive without them for a while.
If you find it hard to forego the extras, look for cheaper alternatives. By adopting this strategy, you will cut down your expenses and release more funds to pay off your loans.
7. Use Found Money to Clear your Balances
Found money refers to money you didn’t initially have; it’s cash for which you hadn’t planned. It includes a pay raise or a bonus payment, an inheritance, or a few extra dollars you might come by when sorting your laundry.
Unexpected funds could go a long way in getting you out of debt. Whenever you feel the urge to spend the money on something else, think of your end goal and how it would feel to be debt-free.
8. Sell What You Don’t Need
Of the items we keep in our homes, there is stuff we rarely or never use. These could be clothes that have become too small, toys your children have grown out of, or old pieces of furniture stored away in the basement. Organize a garage sale and get rid of these extra items.
If you don’t have the time for this exercise, consider selling your stuff online. Besides earning some money to put towards paying your loans, getting rid of stuff you don’t need frees up space in your home.