Personal loan hacks your lender doesn’t want you to know
So, you’ve found the right personal loan. Maybe it’s helped you make that home renovation you’ve always wanted, maybe you took that vacation you’d been dreaming of or maybe you’ve just consolidated debts from some of your existing loans. Whatever you took out your loan for, and whatever personal loan you’re now paying down, these hacks can help you save some serious money.
Make more frequent payments
When you elect to make monthly payments, you’ll be making 12 payments each year. If you make biweekly payments instead, you’ll essentially be paying the same amount each month, but you’ll be making one additional payment each year.
This is because there are 52 weeks in a year, meaning you’ll be making 26 biweekly payments. If you stick with monthly payments, that’s the equivalent of 24 biweekly payments.
The benefit of paying more frequently is that you’ll pay your loan off sooner and save on interest while hardly noticing any difference in your ongoing payments.
On a $20,000 unsecured loan at 14% APR over 7 years, your monthly payment would be $374.80 with the total amount paid sitting at $31,483.22.
If you were to make biweekly payments of $187.40, you would save 11 months on payments and only repay $29,772.95.
By switching to biweekly payments, you would save $1,710.27 in total.
(This calculation assumes that the lender doesn’t charge fees for additional payments or early payoff.)
Round up your automatic debits
An easy way to manage your payments is through AutoPay – you won’t forget to make a payment if it’s automatically deducted from your bank account. This is also an easy way to make extra payments on your loan.
If your biweekly payments are $235, you can round it up to $250, or even $240 – whatever you can afford. Even that extra $5 every payment is going to make a huge difference at the end of your loan term.
Refinance or consolidate your loans
As a borrower, you may get complacent and think switching loans or lenders is too much work and not worth the hassle. But if you see a loan available for a better rate, it could be worth doing some quick calculations to work out if refinancing your personal loan is worth it.
If you have multiple loans, consolidating them into one new loan could not only save you money by locking in a lower interest rate, but also simplify your payments.
Remember to take into account any early payment fees that you might be charged on your current loan, as well as any origination fees or other additional fees you might be charged on the new loan.
Move your personal loan balance to a balance transfer credit card
If you’re in the final stages of your loan term and don’t have far to go, you could consider transferring your personal loan debt to a balance transfer credit card. Several credit card providers let you balance transfer this type of debt and offer you interest-free terms for as long as 24 months.
If you budget your payments and are able to repay your debt within the terms of your new card, you can save considerably on interest payments. The credit card you take on could give you an ongoing means of spending, as well, after you repay your debt.
Keep in mind that some balance transfer cards only apply the 0% interest rate promotion to the transferred balance and not to new purchases. Be sure you know what the regular interest rate will be on the card for when the promotional period expires as well.
Pay off your loan early
When you take on a personal loan, you agree to a certain repayment term length. If you repay your loan before the agreed term, it’s considered repaying your loan early. Some lenders may charge you fees for doing this, while many will let you repay your loan early for no penalties whatsoever.
If your lender doesn’t charge prepayment penalties, you could budget to make lump sum payments and pay off your loan early. You could save hundreds or even thousands of dollars in interest charges depending on how early you repay your loan.
Five personal loan hacks to save money:
- Make more frequent payments.
- Round up your automatic debits.
- Refinance or consolidate your loans.
- Move your personal loan balance to a balance transfer credit card.
- Pay off your loan early.
Getting the lowest interest rate and the least amount of fees isn’t the only way to save on your personal loan. Use these five hacks to reduce what you ultimately pay in interest and get out of personal loan debt faster than you thought you could.