Everyone looks forward to the day when they can honestly say they don’t owe anyone anything. The road to financial freedom can be long and tedious, but employing the right strategies for loan repayment — and avoiding the wrong ones — can shorten the journey and save you a considerable amount of cash. There’s a lot of how-to advice out there about debt payoff, but not all of it is advice worth taking. Here are some do’s and don’ts when it comes to strategies for a faster loan payoff.
DO: MAKE BIWEEKLY LOAN REPAYMENTS
With the biweekly loan repayment plan for large loans, such as your home or car, you pay half the monthly payment every other week. At the end of the year, you’ll have made one extra monthly payment. Because extra payments reduce loan principal, they dramatically shorten the time it takes to pay off your debt and save you money on interest. With AutoPayPlus, you can schedule less painful automatic biweekly payment withdrawals and opt to add in extra installments to the biweekly payments for an even faster loan payoff and greater interest savings.
DON’T: SIGN UP FOR AN ARM OR MAKE TRADITIONAL MONTHLY MORTGAGE PAYMENTS
Interest rates are at historic lows, so taking out an adjustable rate mortgage (ARM) now means you’re more likely to face higher payments in the future — possibly soon if rates climb. Even paying a fixed-rate mortgage using the traditional once-a-month plan isn’t your best bet.
DO: USE CASH INSTEAD OF CARDS
You can’t pay off your credit cards if you keep using them. When you shop, keep that plastic in your purse or wallet and use cash. Paper money feels more real, and you’re more likely to pause before you buy if you have to break a $20 bill for that latte you don’t really need. It’s too easy to spend frivolously when you’re just swiping a card. Put cash into envelopes for the things you need such as gas and groceries. When the cash runs out, it’s gone, which will automatically limit your spending.
DON’T: USE CREDIT INSTEAD OF CASH
Using debit and credit cards instead of cash can lead to unnecessary splurges like that scone with your Starbucks, on-sale items you really don’t need and even extra grocery items that will sit in the pantry until they expire. The unnecessary spending can cause budget creep and high interest credit-card debt, making loan payoff much harder.
AutoPayPlus can help you pay down debt faster. Withdrawals from your account every other week can fit easily with paychecks and monthly budgets, while an extra half payment twice a year toward principal reduces what you’ll pay in interest over time. Read more about the program on this website.