Move closer to ‘Pay Off Day’ in four steps

Move closer to ‘Pay Off Day’ in four steps

Like to get rid of your personal loan faster? Perhaps your income has increased, or are focused on minimising the cost of interest...

Well, if you’re looking for ways to shorten the term of your personal loan, here are four smart strategies to try.

Make bigger (or extra) repayments

Has your financial situation changed since you secured your personal loan? Have you realised that you actually have more budget to work with?

Good news: you may consider putting some extra cash towards your loan. With bigger repayments, the benefit is twofold: you can reduce both the size of your loan and its length at the same time.

The same goes for extra repayments. You may not be in the position to increase the amount of every repayment. But if you receive a bonus, have spare cash to spend or even a secondary income flow, why not make additional repayments?

The more you repay, the faster your debt will disappear, but even a one-off contribution can make a difference. By paying a little extra now, while you can, you’ll save money in the long turn: use our handy finance calculator to find out more.

Choose a faster repayment schedule

Another strategy is to increase the rate of repayment.

Loans are typically repaid on a monthly basis, but this may not be the right option for your needs. Sometimes fortnightly or weekly repayments are easier to manage, especially if you get paid every week or every two weeks.

Keep your payments going

So far, we’ve talked about how you can make the most of an improved financial position. But the truth is, your circumstances might also take a sharp turn south.

If you ever struggle to meet your repayment schedule, it’s a good idea to contact your lender and discuss your options with them. While not uncommon, skipping payments can affect your credit record and future borrowing power, so it’s important to keep your schedule on track.

An exception to this is when you’re offered a payment break. The idea of taking a ‘break’ can be tempting (even if you don’t have any issues making repayments). But once again, bear in mind that it would push back that Pay Off Day and cost you more in interest. Are you sure it is worth it?

Refinance when needed

Reviewing your financial position from time to time (say, every six to 12 months) is key to a healthy financial life – and your personal loan is an important part of it.

Regular loan check-ups can help you identify the right pay-off strategies. You may also find that your loan is not flexible enough for your needs. What to do, then?

Refinancing is an option: it’s a way to negotiate lower interest rates, increase your repayments amount or their frequency. Plus, it could be an opportunity to secure a more flexible loan in anticipation of your future needs.

Whatever strategy you choose, keep the primary goal top-of-mind: saving money over the life of your personal loan. And don’t forget to check your existing loan agreement first. Some lenders charge early-repayment fees, which may (or may not) put a dent in your expected savings.

Like to know more? We welcome you to contact us: the team at LoanSpot are experts in assisting Kiwis with their loan needs. GIve us a call on 0800 666 022 or simply apply here.

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Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure the content is correct, the information provided is subject to continuous change. Please use your discretion and seek independent guidance before making any decisions based on the information provided in this article.