Repaying a loan as quickly as possible is a top financial priority for many of us. Whether you have a home loan or a personal loan, there are some simple steps you can take to reduce the life of your loan.
Tips to pay your loan off sooner
For many of us, repaying a home loan or personal loan as quickly as possible is considered a top financial priority.
Kaine Adamson, Senior Manager Retail Distribution at P&N Bank said that it is worth paying off your debts sooner and a few simple steps can make a big difference over the long term.
Whatever type of loan you are looking to repay sooner, here are some 4 simple tips that can help you to reduce the life of your loan.
1. Switch to more frequent repayments
Weekly or fortnightly loan repayments can save you interest and take months or even years off your loan compared to monthly repayments. Find out if your loan allows you to make more frequent repayments and whether there is a cost or penalty for doing so.
“Every extra dollar you pay will help to speed up the repayment process, but it is important to check the conditions of your home loan or personal loan first,” Mr Adamson said.
“Before you make bigger or more frequent repayments, ask if your lender allows additional payments and early repayments without charging a fee.”
2. Opt for an offset account
An offset account linked to your home loan is a great option which can make a difference over the long term. By having your income or savings in an offset account you can reduce the amount of interest you pay over the life of your home loan.
“You can offset up to 100% of the balance of your linked account against the balance of your loan – lowering the amount of interest you pay and ultimately helping you pay your mortgage off sooner,” Mr Adamson said.
3. Put a little more into your loan
If and when your circumstances allow you to, it is a great idea to pay more off your home loan or personal loan. Some ways you can do this are to:
• continue paying the same repayments if you have a variable interest loan and the interest rate drops;
• round your repayments up – it may only be a few dollars but over time this will add up;
• increase the amount of your regular repayments if your situation changes, for example if your income increases; and / or
• whenever you have some spare cash, consider making a lump sum payment into your loan account.
4. Know your options
Whether you have an existing loan or are considering your first home loan or a new personal loan, make sure that you have the right one for your individual needs to give yourself a chance to repay your debt faster.
For help understanding your loan options, talk to one of our loan consultants on 13 25 77.
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