Whether it’s to cover the cost of a large purchase such as a house or a car, or to pay for those unexpected bills that inevitably arise, there are lots of reasons why you might find yourself needing to take out a loan. The weight of that debt on your mind can be stressful, but luckily there are certain steps you can take to pay off your loan more quickly and work towards a life free of debt. Repaying in a timely fashion can also reduce the total amount of interest that you have to pay, so it is definitely an option worth considering.
Here are five top tips to help you achieve financial freedom.
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1. Only take out loans with regulated lenders
The first factor to keep in mind is that you should only ever take out a loan with a regulated and authorized lender. This ensures that the necessary protections are in place for you, and that you don’t end up signing a contract with unfair terms. If you’re not sure about which lender to use or are struggling to find one, a specialist broker service such as Cash Lady can help you to find a safe and trustworthy lender – even if you have bad credit. One of the key factors to keep in mind is that if a deal sounds too good to be true, it probably is. Always read the fine print carefully before you sign any contracts. If you are not certain about what a particular clause or piece of jargon means, make sure that you ask a friend or family member who has more financial knowledge, so you know exactly what you are agreeing to.
2. Round up your monthly payments or make additional ones
A simple way to pay off your loan more quickly is to round up your monthly payments. For example, if you usually pay $278 a month, try rounding it up to $300. This is a small enough difference that you won’t notice the impact too much, but over time it can help decrease the term of your loan and thus the total amount of interest you pay. Another option is to make extra payments as and when you can, for example if you receive a bonus at work or have a month where you didn’t spend as much money as you normally do.
Before implementing either of these suggestions, be sure to check the specific terms of your loan thoroughly. Sometimes you can be penalized for overpaying or paying off the balance in full early. Others will allow you to overpay by a certain percentage every month, so just be careful not to go over that amount. If you are unsure of the exact terms of your loan, contact the lender directly and ask about their policies.
3. Make a budget and figure out where you can reduce your spending
Making a thorough budget is one effective way to save some money that you can then put towards your loan repayments. This will show you where most of your cash is going and suggest places that you might be able to cut back on your spending. If you’ve never made a budget before, using a planner from a site such as Money Saving Expert can be very helpful. You might be surprised by how much you’re spending on certain expenses! Once you’ve done so, there are a number of little changes you can make to help reduce your outgoings, such as:
- Bringing a homemade lunch to work and cooking dinner at home instead of eating out
- Swapping expensive brands for cheaper ones
- Making a list every time you visit the grocery store – and sticking to it
- Canceling subscriptions you no longer use, whether it’s the gym or Netflix
- Instead of going on expensive days or nights out, look online for cheap and free activities in your local area – you might be surprised by what you find
- Shopping around for deals on insurance, cellphone contracts, utilities, and similar expenses
- Making the most of vouchers and loyalty schemes
- Turning your thermostat down by one degree to save on heating costs
- Switching off lights and appliances when they’re not in use to save on electricity costs
- Waiting a day before making any non-essential purchases, to make sure that you definitely want them
Over time, these actions will add up to big savings and help you to pay off your loan more quickly.
4. Find ways to make a little extra money
In addition to spending less, earning more is a great way to assist you in paying off your loan. For instance, you could pick up more shifts at work or go through your belongings to see if you could sell anything on eBay. This is also a fantastic method of reducing the amount of clutter in your house and can actually encourage you not to buy so many material possessions in the future. If you have an entrepreneurial spirit, you could even try setting up your own business on the side. You can find plenty of advice on the internet about how to do so, and it can be a fun way to turn a passion or hobby into an activity that makes you some extra money. These days there are plenty of ways to make money online from the comfort of your own home too.
5. Take care of your mental health
Thinking about loan repayments is a stressful experience and while it’s important to stay on top of your debt, it’s also crucial to take care of your own wellbeing. So, make some time for self-care and prioritize your mental health. This doesn’t have to cost much. For example, you could meditate or do some deep breathing exercises, go for a walk in the woods to immerse yourself in nature, have a long bubble bath, or read a book. Anything can work, as long as it makes you feel relaxed and happy! Not only is this good for your wellbeing, it will also help you to approach your debt situation in a calmer frame of mind.