You may pay off your student loans faster by making more payments, but you can also refinance them to save money on interest.
Paying more than the monthly minimum on your student loans is the most effective strategy for paying them off early. The more money you put toward paying off your loans each month, the less interest you'll have to pay overall and the faster the principal will be paid off.
You may determine how quickly you might pay off your student loans and how much money you'd save in interest by using a calculator designed for that purpose. Here are seven ideas that can assist you in paying off your student debts in a more expedient manner.
1. Make supplemental contributions in the appropriate manner.
There will never be a fee assessed for either paying off student loans ahead of schedule or paying more than the required minimum amount. However, there is a catch to making prepayments, and that is that the student loan servicers that collect your account may add the additional amount to the payment due the following month.
Although this may move forward your due date, it will not make it possible for you to pay off your student loans any quicker. Instead, you should provide your servicer the instruction, either online, by phone, or by letter, to apply any overpayments to your current amount and to maintain the due date that was originally anticipated for the next month.
You have the option of making a one-time, lump-sum payment toward your student loan on the due date, or you may make an extra payment at any time throughout the month. Either one might help you save a significant amount of money.
For illustration's sake, let's pretend that you owe $10,000 at an interest rate of 4.5%. If you were on a 10-year repayment plan, and you added an additional $100 to your payment each month, you would finish paying off your debts more than five years earlier than expected.
2. Refinance your mortgage if you have a solid employment history and a strong credit score.
If you want to pay off your student loans more quickly without having to make any additional payments, refinancing your student loans is an option.
Through the process of refinancing, several student loans are consolidated into a single private loan, often at a more favorable interest rate. Choose a new loan term that is shorter than the amount of time remaining on your existing loans if you want to pay off your debts more quickly.
There is a possibility that your monthly payment could rise if you choose a shorter term. But doing so will enable you to pay off the loan sooner and save you some of the expense of the interest.
For instance, if you refinanced your student loan debt for $50,000 at 4.5% interest rather than 8.5% percent, you would be able to pay it off over two years sooner. Even if you kept your payments roughly the same, you would still end up saving almost $13,000 in interest with this option.
If you have a credit score in the mid 600s or above, a stable income, and a debt-to-income ratio that is lower than 50%, you could be a suitable candidate for refinancing your home loan. If you are interested in or need federal student aid programs such as income-driven repayment or Public Service Loan Forgiveness, you shouldn't refinance your federal student loans.