Are you in debt? If so, you’re not alone. Eight out of every 10 Americans are also in some kind of debt.
The most common type of debt is debt that comes from installment loans like mortgages, car loans, student loans, and personal loans.
If you currently have debt from one of these loans (or maybe multiple loans), it’s easy to feel that you’ll never be able to be financially free. That’s definitely not the case, though.
Read on to learn some tips that will help you with the process of paying off debt from installment loans.
The Importance of Paying Off Debt
First, let’s go over some reasons why it’s important to pay off your debt. There are a lot of benefits that come with making debt repayment a priority, including the following:
- Increased financial security
- More money to spend on things you actually want
- Less stress
- Fewer bills
- Less interest
- Improve your credit score
- Own your assets (cars, homes, etc.)
Clearly, there are a lot of reasons to start focusing on paying off your debt. Where do you start, though? How do you decide which debts to pay off first?
Before Paying Off Installment Loan Debt
Paying off installment loan debt will not have a negative effect on your credit score. It also might not be the highest cost debt.
The first place to look is where you are paying the most interest and fees. This will generally be if you’ve taken out any personal loans no credit check, or payday loans online. Because these carry huge fees, you can quickly accrue more in interest than you originally borrowed, which will put you in a tough place.
Keep in mind, though, that some lenders charge a penalty if you pay off your installment loan before a certain date. Before you decide to pay off your car or mortgage in full, check to make sure that there’s no penalty for doing so.
If you’re looking to raise your credit score and pay less in interest each month, a good place to start is with your revolving debt — for most people, this includes a credit card or two.
Credit card debt will negatively affect your credit score more than installment loan debt will, so you ought to make it a priority. Once your credit cards are paid off, then you can turn your attention to your installment loans.
Tips for Paying Off Debt
Now that you’ve got your priorities in order, it’s time to start talking about debt repayment strategies. These strategies can be helpful no matter what kind of debt you’re trying to pay off:
Make Your Payments on Time
First, start by making sure you are making your payments on time each month.
This saves you from having to pay extra in late fees. Nobody has time for those fees when getting out of debt is your priority!
If you have a hard time remembering to make your monthly payments, set them up to be withdrawn from your bank account automatically.
Double Your Payments
If you have the cash flow to do so, try doubling your payments each month. This can significantly cut down on the amount of time it takes for you to pay off your debt.
Round Your Payments Up
Does the idea of doubling your monthly payments make you sweat? Don’t worry, that’s definitely not your only option for speeding up the debt repayment process.
Consider rounding your payments up. For example, if you owe $158, try rounding that payment up to $200. That’s only an extra $42 per month, but it still helps you pay off your balance faster.
Make Bi-Weekly Payments
If you’re currently making payments every month on a particular bad credit loan bill or credit card, try making payments once every two weeks instead. This can be an especially good strategy if you get paid on a bi-weekly basis.
Make One Extra Payment
Maybe you can’t commit to regularly doubling or rounding up your payments. But, maybe you can commit to just one extra payment per year.
Consider using your tax return to help bring down your debts. Or, if you know that you’re going to be getting some money for your birthday or Christmas, plan to use some, if not all, of that money to pay down your debt.
Look for Discounts
Sometimes, lenders will give you a bit of a discount if you take advantage of the other services they offer.
For example, they might provide an Annual Percentage Rate (APR) discount if you sign up for automatic billing or paperless billing. Talk to your personal loan lender to see if any discount like this is available to you.
If you’re trying to bring down your debt by paying off installment loans, you might want to look into refinancing them.
This can help to lower your interest rate and, as a result, lower your monthly payment. This might make it easier for you to double or round up your payments and pay off the loan more quickly.
Increase Your Income
If you’re currently only making the minimum payments on all of your bills, it’s going to take you quite a while to get out of debt. You might need to start looking for ways to increase your income so that you can make larger payments.
Consider picking up a side job walking dogs for Rover or driving for Uber or Lyft. You can earn a lot of extra money with these side jobs, and you only have to work when it fits your schedule.
What About When You Need a New Loan?
If you feel like you’re drowning in installment loan debt, these tips can help you find your way out.
Paying off debt is great for your bank account and credit score. It also is great for your mental health and can relieve a lot of stress. When you pay off credit card and installment loan debt, you also have more options if you need to take out a loan in the future.
At some point later down the road, there’s a good chance that you’ll need another no credit check loan. When that time occurs, you’ll have more options available to you since you’ve paid off your past debts.
When you need a loan in the future, consider working with us at Bonsai Finance. We make it easy for you to apply for loans online, and we offer a variety of loans, including personal loans and student loans. Here are some other articles you might find helpful:
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