How to Pay Off a Personal Loan Faster? 4 EFFECTIVE Ways

When it comes to paying off debt, the sooner you pay it off, the more you save in interest costs. For instance, a personal loan with a long loan term will prove to be more expensive for you in the longer run, as compared to one with a shorter term.

So how to pay off a personal loan faster? Well, there are many ways to pay off a personal loan fast. Read on to find out some effective strategies to take good financial action.

Should You Pay Off a Personal Loan Faster?

In most cases, paying off a personal loan faster is a good idea. However, it also has some potential drawbacks. 

Here are the pros and cons of paying off your loan faster:

Pros

• Save up on interest costs
• Pay off your debt faster
• Reduce financial burden

Cons

• May have to pay a prepayment penalty
• Potential opportunity costs
• Reduced liquidity

How to Pay Off a Personal Loan Faster?

There are many ways you can pay off a personal loan quickly and save money on interest:

1. Cut Your Spending

One of the first steps you can take to pay off your personal loan faster is to find ways to cut your spending. Go through your monthly budget to figure out any unnecessary expenses and cut them out so you can save more money. 

Use the extra cash to make your loan payments so you can pay off the entire amount faster. 

2. Consider Biweekly Payments

You can also repay your loan in biweekly payments, instead of monthly payments. This way, you can cut months off your loan term and save up on all of those month’s interest costs without having to pay anything extra. 

For instance, if you pay $100 every month, you can divide this payment in half and pay it biweekly. This way, you will be paying $1,300 in 26 biweekly payments, instead of $1,200 in 12 months.

3. Make Extra Payments

Another way to get out of your personal loan debt faster is by making extra payments whenever possible. For instance, if you have some cash left at the end of the month, consider using it to make an extra loan payment, instead of spending it elsewhere.

You can also use any cash gifts or extra earnings you may make to pay off your loans. For instance, you can use our loan calculator to find out how paying an extra amount every month will help you repay the loan. By simply putting aside a few bucks every month, you can pay off your loans much sooner.

4. Consider Refinancing Your Loan

Last but not least, loan refinancing is also an incredibly effective way to pay off your loan early. However, it only works if you get a lower interest rate than your current loan.

When you refinance a loan, you revise your loan terms to get a lower interest rate and better terms. You can qualify for better interest rates if you have made timely debt payments in the recent past or have a better credit score than you did when you took out the original loan.

So apply for refinancing and find out what interest rate you will get. If it is lower than your current rate, go ahead and refinance your loan to make higher monthly payments every month. This way, you can cut a considerable amount of time from your loan term.

Bottom Line

Now that you know how to pay off a personal loan faster, you can reduce some of your financial burden and live a stress- and debt-free life. However, do note that you may have to pay a prepayment penalty if you are paying off your loan early. 

Make sure to check with your lender if there’s a prepayment penalty before you make any decisions. Good luck!