If you are living with debt, then you're not alone. A recent study by Statista shows that the average personal debt per person in Australia is approximately $46,000.
As the economy continues to slowly recover from the global pandemic, many people are struggling to keep up with loan repayments. If you're finding yourself in this situation, don't despair - there are ways to pay off your debt faster.
In this blog post, we'll explore some of the ways you can pay off your loan debt faster. We'll also answer some common questions about loan repayments. Finally, we'll provide some tips on how to pay off debt fast even with a low income.
So, let's get started!
How to pay off debt faster
One of the best ways to pay off debt faster is to make bi-weekly or extra payments. By making bi-weekly payments, you'll be paying off your loan every two weeks instead of once per month. This means that you'll end up making 13 monthly payments instead of 12.
Another great way to get rid of your debt sooner is to make extra payments when you can. If you receive a bonus at work or get a tax refund, consider using that money to make an extra payment on your loan. Even an extra $50 per month can make a big difference in the amount of interest you'll pay over the life of your loan.
So, what's the best way to pay off loan debt?
The answer may vary depending on your individual circumstances. If you have a high-interest rate loan, you may want to focus on paying that off first so that you can save on interest payments. On the other hand, if you have a low-interest rate loan, you may want to focus on making extra payments to pay off your loan faster.
Taking out a debt consolidation loan is one of the most effective ways to pay off your debt ahead of schedule. If interest rates have dropped since you took out your loan, or your credit has improved significantly, this could be a smart option for you. However, refinancing your debt makes sense only if it helps you pay out the amount owing sooner. To figure out how much your monthly repayments on your vehicle loan could be reduced with more current interest rates check out our car loan calculator.
Here are 3 other ways to pay off your debt faster:
1. Finding an extra source of income
Working on making extra money to put toward your loan is a smart method to decrease the amount of time it takes you to pay off your debt. Consider selling goods on Amazon or eBay, eliminating impulse purchases and putting the saved money toward your debt, or taking on a side hustle on weekends or holidays for extra cash. Oh, and don’t forgo putting your tax refund to work for you in paying down your credit card debt.
2. Create a debt repayment plan
If you're not sure how to start paying off multiple debts, creating a repayment plan can be helpful. Start by listing out all of your debts from smallest to largest. Then, focus on making the minimum payments on all of your debts except for the smallest one. Once that debt is paid off, you can focus on the next smallest debt and so on.
This is known as the snowball method, and it can be effective in helping you become debt-free.
3. Round your monthly repayments up to the nearest fifty
If you're looking for an easy way to shorten your loan, consider rounding up your monthly repayments to the nearest $50. For example, if your car loan repayments are $220 per month, bringing that number up to $250 can save you a significant amount in interest and knock a few months off the life of your car loan.
Does paying off loans faster help your credit score?
One of the benefits of paying off loan debt fast is that it can help improve your credit score. A higher credit score shows lenders that you're a low-risk borrower and could lead to lower interest rates on future loans.
Additionally, having a good credit score can give you more negotiating power when it comes to loan terms and conditions.
Paying off a personal loan early
If you have a personal loan, there are a few things to keep in mind when it comes to paying it off early. First, check if there are any prepayment penalties associated with your loan. Prepayment penalties are fees charged by some lenders for paying off your loan ahead of schedule.
Second, make sure that you're not sacrificing other financial goals in order to pay off your loan early. For example, if you have high-interest credit card debt, it may make more sense to focus on paying that off first before putting extra money toward your personal loan.
How can I pay off debt fast with a low income?
If you have a low income, there are still ways you can pay off your loan debt faster. One option is to look for part-time work or take on freelance gigs to boost your income. You can also consider downsizing your lifestyle temporarily so as to free up more money to put towards your loan repayments.
Another option is to negotiate with your lender for a lower monthly payment. If you can prove that you're struggling to make your loan repayments, your lender may be willing to work with you. Finally, consider consolidating your loans into one loan with a lower interest rate.
Is it better to pay off loans fast or slow?
There is always the temptation to just make the minimum loan repayment each month. However, this can end up costing you more in the long run as you'll be paying more interest on your loan. If you can afford to, it's always better to pay off your loan faster so that you pay less interest and save money in the long run.
Paying off your loan debt as quickly as possible has several benefits. One of the most obvious benefits is that you'll save on interest payments.
Additionally, paying off your loan debt fast can help improve your credit score. Finally, if you have a low income, paying off your loan debt fast can free up more money each month to put towards other expenses.
If you're a business owner looking to pay off commercial finance, the same principles apply. By paying off your commercial finance faster, you can save money on interest payments and improve your company's credit score. This can also free up more cash flow for your business to put towards other expenses or investments. It's always a good idea to consult with a financial advisor to determine the best strategy for paying off your commercial finance based on your unique financial situation and goals.
If you're struggling with debt, know that you're not alone. Millions of Aussies are in the same boat. However, there are steps you can take to pay off your loan debt faster.
Consider working on making more money, creating a repayment plan, or rounding up your monthly repayments to the nearest $50. Even a small change in your spending habits can make a big difference when it comes to paying off debt.
Being proactive and following a budget can help you save money which can then be put to use in paying down your debt faster so you end up paying less interest over the life of your loan.
Paying off debt can be a daunting task, but it's important to remember that you're not alone. The Australian National Debt Helpline is a free service that can provide you with advice and support. You can also check out ASIC's MoneySmart website for more tips on how to manage your money.
There are many resources and strategies available to help you get out of debt. So, take some time to research your options and find a plan that works for you.