Loans are a great idea for anyone who wants to fulfill a very big dream, like buying a house. But for this dream not to turn into a nightmare it is necessary that all installments of the loan are paid on time.
It is even better when the installments to get a loan are paid in advance. After all, it is possible to earn a good discount on the final amount and get rid of that debt once and for all. Want to know how? Just follow the reading to the end!
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How to pay off the loan?
The advance of installments is a right of the borrower. When opting for the operation, the interest rate of the installment is readjusted according to the payment date. This way, the customer gets a “discount” on the Total Effective Cost of the credit.
This “discount” is even greater when the advance installment is from the last to the first. Generally, to make the advance, the customer must request a new payment slip to the financial institution.
Refinance the remaining balance to quickly pay off loan installments
One option to get a better rate is to refinance the loan with the finance company. Trying to close a deal, where you can receive a better Total Cost discount, can also help you settle the commitment faster.
Depending on the negotiation, the client is able to make a new entry into the agreement, paying an amount greater than that of the new installments. In this way, the next ones may be smaller, as well as the term for total debt settlement.
Boost monthly income
In addition to anticipation and refinancing, the client can increase the monthly income he has. So, with the extra money in the budget, he will have two options: save to set up a savings account or use that amount to pay off the loan.
Now, are you wondering if it’s worth paying off debt? Yes, it is! You don’t need to pay off the loan, you can only reduce a portion of what you still have to pay off.
Make biweekly payments
Send half payments to the lender every two weeks. This will help you:
- Accumulate less interest because your payments will be applied more often;
- You will have an extra payment because there are 52 weeks a year, which equates to 26 annual payments (or an extra).
But it’s worth making sure beforehand and discussing this with your lender before making biweekly payments to make sure you get benefits under your contract.
Round your payments
Just like making biweekly payments, you don’t need a lot of extra cash to cut a few months off your loan. If you’re working on a tight budget, see if you can create a little extra space each month to increase your loan payment installments.
Make an extra payment
You’ll pay off debt faster by adding an extra monthly payment each year. If your monthly payment is $240, then pay the same amount extra for some time during the year.
It can be difficult to make the extra payment. You can spread the extra payment over the entire year. Your payment of $240 will become a payment of $260 (240 divided by 12 equals 20, 240 plus 20 equals 260).
Benefits of paying loan installments early
Paying off your loan or credit card debt early can save you money in interest and shorten your overall loan term. Imagine what you could do with your saved money: invest for retirement, improve your home, or pay off other debts.
There are many benefits to paying off your loans early, but one of the biggest is less stress and less risk, because you will be free of your lender!