Paying Off a Loan

Most consumers love to get a loan in order to make a major purchase, but making payments on that loan is not as fun. You can't just simply wish away the loan and it will vanish. Instead it takes diligence to pay the loan off on time, and it takes planning and persistence if you plan to pay it off early. If you have a loan with a high interest rate it may be wise to look into the possibility of paying it off early in order to avoid all of the money spent on interest. If you are currently a indebted to your lender and have the dream of being debt free, there are some great ways to make sure that happens.

Paying More than the Minimum

Many people make it a habit to pay the minimum loan payment each month, or refinance homes to achieve more affordable payments. Although this will keep your credit history clean, it not get your loan paid off early and it certainly will not save you money in the end. Instead, consider paying over your minimum payment each month. That extra amount will be applied directly to the principle rather than just on interest and this will pay down the overall amount of the loan much faster. And, you will save money on the interest charges paid out.

How much you pay extra each month will have a direct impact on how quickly your loan is paid off, and how much money you will save in the long run. By paying an extra $100 each month toward your mortgage you could own your home outright years sooner. And, of course the faster you pay down the principle, the more equity you are building into your property.

Of course if you have a lot of other debt other than your mortgage, you may need to get rid of it before pouring that money into your mortgage payment. If you have credit cards with high interest rates then you would want to pay those off before you pay extra toward your mortgage. It is a good rule of thumb to first pay off the credit cards and debts with small pay off amounts, then begin to tackle those with the highest interest.

Budget your Debt Payments

Basically, you will need to determine how much of your budget you will allocate toward paying off debt each month. And, once one debt is paid off you then take that amount and direct it toward the next amount. So, once all of your other debts are paid off you can take that amount and use it to make over payments toward your mortgage and pay it off early.

If you have a lot of equity built into your home and a lot of high interest debt, you may want to consider refinancing your home in order to pay off that high interest debt and take advantage of lower interest rates with your mortgage. Of course that will set you back from paying your home off early. But it could save you a lot of money on high interest and more of your debt payments would be going to principle rather than interest.

If you are hesitant to roll your debt into the equity of your home, you may want to use money you have in savings to tackle your debt. The interest you are earning on your savings is not likely exceeding what you owe on those high interest cards. So, paying off a loan early by using your savings could save you money.

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