Personal loans can be an excellent way to alleviate financial strain when used responsibly, but you must make sure you can afford the monthly payments without risking other expenses or harming your credit rating or history.
Here are a few strategies that may help reduce interest charges and help you get out of debt faster:
1. Increase Your Monthly Payments
Increased monthly loan payments are one of the best ways to bring down overall costs associated with personal loans. By directly impacting principal balance and decreasing interest costs, this strategy will help accelerate debt freedom faster.
Add extra payments whenever you receive windfalls like bonuses or tax refunds to reduce the number of bills to pay each month, such as personal loans and credit cards. This approach may prove particularly helpful for tackling multiple debts simultaneously.
Before investing additional funds towards your Richmond Hill personal loan, take care to consider other financial responsibilities, like emergency savings and retirement accounts. Avoid placing yourself under financial strain in the future by allocating enough resources towards emergencies if necessary. In addition, try prioritising loan payments using digital tools or reminders so that all monthly instalments are paid on time to avoid late payment fees and save yourself late payment fees altogether.
2. Make a Principal Only Payment
Assuming there are no prepayment penalties involved, applying a lump sum payment to the principal of your loan could significantly lower its total costs. Ideally, this should occur when making regular monthly payments so as to ensure most or all of this extra money goes toward paying down principal.
Make sure to inquire with your lender to see if making extra principal payments is allowed and any applicable fees. Regardless of how you’re paying online, by phone or in a branch – be sure to inform them that these funds are intended solely for principal repayment and they will be properly applied by servicer. Also ensure you regularly review statements and online accounts to ensure these additional payments were correctly applied; any mishap could leave a ding in your credit score!
3. Sell Idle Assets
Individuals often possess items they no longer need or that have lost value over time, which they could sell to generate extra cash and make lumpsum payments towards a personal loan to reduce interest expenses and build credit. Furthermore, money left sitting idle can quickly lose its value due to inflation or lack of potential opportunity costs.
When extra income such as tax refunds, work bonuses or cash gifts from relatives arrive, consider using it to pay down your personal loan faster. Selling items through social media channels or dedicated resale sites such as Poshmark, ThredUP and Chairish may help maximize the use of your funds and speed repayment of your personal loan faster.
4. Make Payments on Time
An early repayment of your personal loan can reduce overall debt load and interest costs while simultaneously improving your credit score, making mortgages and other financial products more attainable.
Beyond making monthly loan payments, other strategies to accelerate debt repayment goals could include using tax refunds, wage bonuses or income from side hustles to further decrease your balance faster.
Keep a close watch on both your credit score and personal loan status to make sure that your payments are on time, preventing late fees or penalty charges that could add up quickly. Some lenders even let you select when payments should be due to ensure a timely repayment that works with your budget.
