How to Pay Off Loans Early

For many Americans, obtaining a loan is the only way to purchase a home, finish college or buy a new car. These loans can vary in length and the longer the loan, the more the borrower pays in interest. Paying off a loan early will not only mean paying less interest, it can save money to pay off other debts or save for a vacation or retirement. There are several ways to pay off a single or multiple loans early.

Instructions

1. Break up payments toward a loan on a weekly basis instead of on a biweekly or monthly payment schedule. Several months of every year have five weeks instead of four, and this will translate into more money paid out during these longer months.

2. Apply large lump sums of “found” money toward the loan. Take a portion or all of a tax return, lottery winnings or an inheritance and pay off all or part of a loan or loans.

3. Round up all of the loan payments to the nearest whole dollar amount each month. For instance,if a bill is $241 a month, pay $250 instead. The extra nine dollars will help pay off the loan that much quicker.

4. Set up an automated payment through your bank. Sign up to pay for particular loans each month on a certain date automatically and make the amount paid each month slightly larger than the bill. This will ensure the money is taken out before it can be spent on any unnecessary purchases.

5. Shorten the length of the loan. For instance, a traditional 30-year mortgage can be refinanced and paid off in 15 years instead. The payments are higher each month, but the loan is paid off faster and with less interest.

References

• Suburban Dollar: Pay off Mortgage Early
• Lenders Mark: Paying off Your Mortgage Early