Loans are the least favorable liabilities anyone wishes to have, it’s a massive burden to have on your shoulders when you are still in your student life. Dealing with student loan debt is tough, especially if yours is significantly high, however, it does not have to cripple you. Below in this article, we will cover the Top Tips on How to Pay Off Student Loans Quickly.
Understanding how to deal with your debt efficiently and in some cases, swiftly, can make all the difference. The often-necessary burden of student loans throughout college can be viewed as a means to an end regarding landing a great job, and a decent salary, but that burden does not come without its share of stressors and obligations. Creating a plan beforehand can help to prevent you from feeling like you are drowning once your repayment period begins.
Understand Your Loans
Signing your loan agreement and then going on autopilot once the repayment period begins, and staying there until it ends will get your loan paid off, but do you understand what it might cost you? If you take out student loans from a private lender to pay for your education, those terms are going to vary as opposed to if you use government-funded programs or other methods of acquiring borrowed money.
Really understanding your specific loan, the expectations of the terms, and your payment options can make the difference in hundreds if not thousands of dollars as well as shorten the lifespan of the loan. You might have an option available to choose a better payment plan that will fluctuate with your income and help you to manage your monthly bills better by refinancing, then as you earn more, you can allocate more towards your student loans in an effort to get them paid down faster.
Live Like You’re Still in College
Your first adult job, and an associated paycheck, is a huge milestone. And after having spent the past four or more years eating ramen and sleeping on futons, it’s natural that you are going to want to elevate your lifestyle to match this next stage of life, but try and hold out.
Imagine how much money you could save if you continued to spend like a broke college student, with the earnings of an adult in the professional arena. These short-term sacrifices like a hand-me-down car, living with roommates, and saying no to expensive dinners and vacations can create the extra cash you need to pay down your student loans faster.
Shortening the lifespan of your loans is going to provide you with greater long-term financial rewards, and allow you to have financial freedom sooner than those who spend hard now on material items as opposed to allocating extra funds towards their debts.
Debt after Graduation
Tacking on more debt immediately after graduating with things like a mortgage, high-interest credit card, or brand-new car is only going to create more stress and obligations for you a month to month. Have a vision for the things you want your money to create for you and be willing to space them out. Falling victim to ‘keeping up with Joneses’ is a bad habit and can be quite costly. Earn, spend, and save at the pace that best facilitates your specific goals.
Student debt is very personal and will follow you as you transition through life’s stages, so think seriously about how many of these stages you are willing to allow it to be a part of, and create a payback strategy that is aggressive but still manageable for the life you live today as well as the one you are planning on in the future.
Checklist to be debt-free before your student life ends
Pay over minimum Stipulated Time Frame
- The most simple and yet the most effective advice is that you should pay up and over the minimum stipulated payment, you have to pay. Paying more than the installment amount will result in two things, firstly you will quickly get rid of the debt, secondly, you will have to pay less interest on the balance amount.
- Let’s take an example: suppose you have taken a loan of 10 lakhs and have to pay installments of 20k each month. If you keep on paying installments of 20k it will take you 4 years and 2 months to pay off this amount. Plus you will be paying interest with each installment. But if you pay off the loan in less time by paying the amount in a lump sum, you will save the interest expense and the burden of debt will be forgiven.
Refinancing can be resorted to
If you have a good credit score, you can refinance your existing loan which is at a higher rate of interest with a loan at a lower interest rate. This will again help you save the interest expense and the loan will be paid off.
Strictly follow the repayment plan
If you cannot make extra payments up and above the installments, you are advised to stick to the payment schedule. It will be the shortest road to being debt-free.
See if your job offers any schemes in this domain
There are several companies which help their employees to pay off their student loan. It is part of their employee’s benefits or non-monetary benefits. In exchange, they might ask you to work for extra hours or on weekends. In this way, you can use your job to your advantage to get rid of your student loan.
Sign up for autopay
The majority of the loan servicers offer a 0.25% cut in the interest rate when you apply for autopay. You might think it’s a minor saving, but these minor savings in life add up to big benefits.
Switch to bi-monthly payments instead of monthly payments
This is an interesting way to make an extra payment each year! Yes, by making bi-monthly payments instead of monthly payments, you can make one extra payment each year, and hence pay off your student loan in shorter time duration.
We all want to be debt-free in life but that doesn’t come easy especially when you have significant educational loans on your shoulders. It is a mental burden much more than a financial burden which you will have to bear until and unless you pay it off.