The world is full of many catch-22 situations, and having to take out a student loan is one of them. The job climate right now is such that you need a degree to get just about any job, but you might not have enough money laying around to make that kind of commitment. Since getting a job is essential to your future, it more or less becomes necessary at that point to take out a student loan.
If that sounds familiar to you, you’re like thousands of people around the world currently worried about the financial burden caused by having to deal with student loan debt. Paying it off as quickly as possible is conducive to starting the next chapter of your life, and saving for your next major purchase like a new car or a house. Luckily, there are a few ways of going about this task, and a lot of them are pretty simple.
Make an extra payment
Many student loans tend to lean on the less predatory scale as far as loans go, and will allow you to make an extra payment without what’s referred to as a prepayment penalty. Consider how often you’re able to make an additional payment on top of your monthly payments, and then apply that to your current repayment program. This way, instead of having only 12 payments a month, you could have as many as you can handle financially.
Refinance your loan
A refinance is when you take out a new loan to cover an existing loan, but the interest rate and terms are much better than the old loan. If you calculate the payoff amount on student loans sooner rather than later, you can get a lower interest rate on the refinanced loan. You’ll need to enlist the help of a bank or professional lenders like elfi.com that are willing to help you refinance. Refinancing is a good choice if you’re finally settled into the job market and making money for yourself, all while having good credit.
If those terms are met, it’s highly likely you’ll be able to secure a much better loan than the one you’re currently paying off. This will result in you paying less in interest payments over time.
Don’t just pay the minimum payment
As enticing as it may be to just coast by paying the minimum payments on your loan so you have more money to spend during the month, this strategy actually works against you. The longer it takes to pay off your loan, the more you’ll have to pay in interest over the entire course of the loan. If you choose to pay as much as you can handle financially, you can end up saving hundreds of dollars in total.
Make a lump sum payment
Next time you receive a bonus at work or an excessive amount of Christmas money, consider earmarking that cash for your student loan as opposed to treating yourself. A single lump sum payment of $2000 can save you the same amount in interest fees, as well as help you pay off your loan several months faster than you when had just spent it on a week’s vacation in Cuba.
In the end, choosing to get a degree increased your upward mobility in the real world and enabled you to obtain gainful employment. The shadow of student loans won’t have to loom over your life for the next fifteen to twenty years of your life. If you make prudent financial decisions now, you’ll end up having a lot more money to play with later in life, and not have to worry about student loans holding your credit back when it comes to getting a house.