How to Save Money on Loan Interest
Loans provide help at times but can become a headache if you don’t stay on top of it. A loan is paying money with the promotion of money returned back, plus a little extra. That profit earned from a loan is called ‘Interest’. Interest is the reason why loans can be hard to pay off. You may not be able to avoid the interest if you have taken a loan, but you can ensure it is kept to a minimum. Here you will find four ways to save money on loan interest.
Try Biweekly Installments
We usually pay an installment after one month. You can save money if you make payments more frequently. One way to go is by paying two installments in one month, in other words, ‘biweekly payments’. It may feel like a drag paying every two weeks, but you will be paying shorter installments which won’t feel heavy on your pocket.
The biggest advantage of biweekly payments is that you will have paid one extra installment by the end of the year. There are 12 months in a year and 52 weeks. With the monthly system, you pay 12 installments, but with the biweekly system, you will have paid a sum equal to 13 installments. This way your debt will end sooner than expected with less interest. Best of all, you won’t even feel the difference of paying more installments.
Round-Up Each Payment
First of all, make automatic payments. Instead of manually transferring each installment, do it through Autopay. It will ensure no payments are delayed saving you from complications of late penalties. If you don’t pay an installment on time, you have to pay interest on it for the days it was delayed. Once you get that right, round up the sum you pay each month. For example, if you are paying $215 a month round up to $250. This little difference will won’t feel much, but make your debt end sooner, and it will be easier to calculate.
Pay off Early
You and the lender agree to complete all installments in a decided period of time. That period of time is one of the important factors that affect your interest rate. The interest rate decreases if you repay your loan earlier than the agreed time. Some lenders charge you an early payment fee for this depending on the type of loan and their policies. Many people prefer to get installment loans online because of the easy application process, you quickly get your money, and easy to payback compared to bank loans.
Combine All Your Loans
If you have multiple small loans, consolidate them all into one. How much it will save you depends on the terms and interest rate you agree on. One thing for sure, it’ll save you from the hectic task of keeping up with all loans. Many people get one big loan to pay off all their small loans in one installment and then focus on paying that big loan with lesser interest. If you are to follow this approach, be sure to take into account the ‘early payment fees’ on current loans and ‘origination fees’ on the new loan.
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