5 Tips To Manage Your Loan Payments

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When you have loan payments, you need to manage them to get out of debt. Although paying your monthly dues on time is okay, it may take time before you can be debt-free. Besides finding more side hustles to earn more income that you can use to pay off your debts, there are other ways to manage your loan payments. If you want to pay your loans in a shorter period, you may want to consider the following tips:

1. Do The Avalanche Method

The debt avalanche method focuses on paying loans with higher interest rates first. Doing this can save interest and time on your debt payments.

As such, start by listing your debts from the ones with higher interest rates to the lowest. Then, plan how to pay the loan with the highest interest on a large amount while continuing to pay the regular payments of the other loans. It means you need to stick to a budget to free up some cash that you can use as a large payment for your loan payments with the highest interest rate. 

For instance, you have USD$3,000 at 10% and USD$2,500 at 9% loan. You must prioritize the loan with the highest interest rate, which is the USD$3,000 loan. Then, depending on your budget, you can add USD$300 to your minimum monthly payment until you’ve paid it off.

Once you’ve paid the one with the highest interest rate, do the same on loan with the second-highest interest rate. Continue applying the avalanche method until you clear all your loan payments.

2. Consider Debt Consolidation

You may also want to try debt consolidation from reputable lenders like Raiz or other lending companies in your area, wherein you’ll take out a new loan to pay off all your loans. As the term implies, you’re consolidating your loans, relieving you of paying different lenders at various interest rates. You’ll also have an extended payoff period aside from only paying one lender each month for all your loans.

However, expect to have more interest payments, too.

You may even be paying higher interest rates than the current ones, so it’s best to find loan terms that keep your payments the same or lower.

And most importantly, you’ll lose income-based repayment plans and deferment options when considering consolidation. The deferment option refers to a period in which you don’t have to repay your loan’s principal or interest. Thus, it would be best to consider whether consolidation will help you manage your loan payments.

3. Always Pay On Time

Another way to manage your loan payments is to avoid penalties and late fees that would incur when you’re not paying on time. Although such extra fees may seem small, they can become substantial when they accumulate. This could ruin your financial situation since you’ll add more to your expenses instead of lessening them.   

As such, you must avoid late payments. One way to do this is to have automatic deductions on your monthly salary. Since it’ll be scheduled and automatically deducted, you won’t have an excuse to ‘borrow’ the money intended for your loan payments.

Another way is to set money aside each month after creating a financial plan. Doing this allows you to practice saving for your loan payments instead of spending your money first.

4. Make A Prepayment

You can also make early payments instead of waiting for your loan payment due. This technique not only helps you avoid late fees, but you’re also giving yourself a buffer in case you’ll miss a payment. If you’re receiving an investment return or unexpected bonus, make a prepayment before splurging such extra cash on other luxuries. Prepayment refers to paying your loan before its installment due date. However, before doing this, ask your lender whether they have a penalty on debt prepayment.

5. Do The Debt Snowball

Like the avalanche method, the debt snowball allows you to add some bucks to the minimum payment on your loans. However, unlike the avalanche method, you’ll start paying off loans with the lowest interest rate on a debt snowball. This method eliminates your loans quickly since you can pay off the smallest debt before proceeding to the next smallest debt.

The best thing about snowballing your debt is that it motivates you since it allows you to eliminate debts quickly while gaining momentum. Seeing progress on your loan payments could help you focus more on paying your debts.


There are many other ways to manage your loan payments, but the ones mentioned above are the most common. You can follow one or two methods as long as it’s within your financial condition. And most importantly, you should be disciplined to follow whatever way you choose. Remember that with such discipline, you can pay your loan on time, or you can even pay all your loans at an earlier month or year.

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