Want To Pay Student Loans Off Faster? Use these 5 Tips!
While there are those that claim it’s not possible to put a price tag on a great education, most millennials aren’t so sure. As a matter of fact, a lot of current graduates have to face the cumbersome reality of getting their student loans paid off in a reasonable amount of time.
(1) Act Like Your Loan Is A Mortgage:
If you’re able to afford doing so, treat your loan as if it were a mortgage. Just make bigger payments in order to get the principal cut down faster. This is one of the strongest tactics to getting student loans paid off fast. When you can reduce the principal balance, you’re also reducing how long the loan will last and how much interest you will accrue.
For instance, a student loan of £25,000 at 6.8 percent interest over a decade of payback runs £288 each month. Paying £700 each month rather than £288 lets a borrower repay their loan in only three years instead of 10.
Another tactic is to add payments. Send in a cheque every other week instead of every month.
Once you repay a college loan, the advantages start multiplying. That starts with it just being one less debt that you owe anyone. Any money you’re making now can be freely invested towards more favourable applications, like owning your own home, creating a nest egg for retirement, or putting your own kid through higher education.
(2) Make A Plan:
Funding analysts at Pronto Finance say, “creating a 3-, 4-, or 5-year plan can help you comprehend the scope involved in paying off a student loan. They suggest, “if there’s an end date you can actually see, then it’s a lot easier for you to commit to student debt elimination.”
For instance, consider an example of a married couple whose collective college debt is £50,000. Each year, they also combine for £100,000 in wages. If they create a 3-year budget with an eye on completion, then they find the adjustments needed in daily spending to reach their goal. That budgeting can possibly even show more ways they can use towards minimising their principal balance.
When it’s all said and done, budgeting in a 3- or 5-year plan might seriously cut down on how many years you spend cutting down your student debt. Also, you’ll find no lack of online budgeting tools you can use along the way.
(3) Put Together A Fund:
Establishing your own college repayment fund can help you quickly pay down student loans, especially if the money is put somewhere you can’t access it easily by just swiping a debit or credit card.
If you can, set it up so that money is moved automatically into a savings account. The fact that it’s forced makes it effective. It lets you set money aside for growth instead of spending it on eating out or buying things.
Just be sure that the account you establish is only put towards paying down your college debt. Do not use a current account already in use, since that money might go towards things other than student loans. Compare your savings accounts and then put money in any account that has a higher yield than others so that you can make the most of your savings.
(4) Get Ahead With Part-Time Work While In College:
If you can get part-time work while you attend college, then you can keep your college debt down since you’ll make money useful in offsetting your student loan debt.
Consider the possibility of working part-time and being able to sock away £500 each month. In just one year, you can reduce your student loans by £6,000.
(5) Steer Clear Of The Typical Traps:
As ironic as it might be, many students feel a need for instant gratification. That actually keeps them from paying down student loans fast, and that consequently means delaying life fulfillment they’re likely to enjoy even more. If you plan ahead, aware of how your own mind functions, then you make the sacrifices necessary to keep you on track with your budget.
Other students take advantage of availing loyalty cards to save money especially when they have a very tight budget. They try to find numerous ways to spend less and develop self-discipline.
Keeping up fiscal discipline is hard for lots of people. Many of them can’t even save money. They just spend like there’s no tomorrow.
Those who are successful in reducing their college debts do so by living within their own income and are mindful about saving.
This article has been written by Chandra Mehta.
Chandra is a seasoned banker with 35+ years of experience in banking and financial services industry. He’s a retired banker and has served as Chief Manager and Assistant Vice President in State Bank of India/or its subsidiaries. He has authored many articles on this site (allonmoney.com).