Loans are a blessing and a curse. They can bail you out when you are in need of money but then you have to pay them back and you need to plan how to do this. It is possible to get a loan without interest but not too likely; therefore you need to plan to pay the interest on the loan as well as the principal.
Contact your loan company or read your contract and be sure there isn't a prepayment cause. A prepayment cause can prevent you from paying less interest, since it states the amount of interest that you pay regardless of when you pay the loan. This means that if you borrow $500 and have interest of $50, then you have to pay $550 no matter if you pay the loan off in advance or not.
Add extra money to your monthly payments. As long as you don't have a prepayment cause you can apply the extra payment to the principal of your loan and therefore reduce the amount of interest you need to pay, which means you can pay less. In the example above, if you pay the loan in 6 months instead of a year you may save $25 in interest.
Select a loan that will give you time without interest. Many credit card companies offer zero percent interest for a certain amount of time. Figure the amount you need to pay each month on the loan before the interest payments start, thereby eliminating the interest fees.
Send in a check for the minimal payment for the monthly payment of your loan plus a second check, which is clearly marked for additional principal. Alternatively, you can make payments weekly instead of monthly, which will cut the loan down drastically.
Pay the full amount of the loan when it is due rather than just a monthly payment to avoid the interest. Paying the loan in full means you only pay what you borrowed.
Tips & Warnings
- Paying a little extra every month will make your loan balance decrease faster and allow you to get out of debt sooner.
- Be careful, some of the interest free loans accumulate interest from day one. Therefore, if you don't pay the loan in full before the interest starts, you have to pay interest on the money from day one.
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