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Everyone appreciates what a loan can do: allow you to buy something now that you could not afford, outright. That doesn’t mean you want to keep that loan forever.
Every loan comes with interest. The sooner you pay it off, the less interest you pay, and the less the overall cost.
Here are some simple steps you can take to pay your loan off sooner.
1. Pay weekly or fortnightly. Interest is calculated daily so any payments you make before the monthly payment is due, help reduce the principal which reduces the interest.
2. Make extra repayments. As little as $20 per week can make a difference
3. Lump sum repayments. Use tax refunds, work bonuses or child care rebates to boost your repayments.
4. Deposit majority of your pay into your loan. Organise your pay to be split so you have a cash balance in your savings account for everyday living and balance goes to your loan.
5. Use redraw. Any extra repayments you have made on a variable loan are available for redraw (withdrawal from your loan) no minimum, no fee.
6. Use your credit card. Take advantage of your interest free period on your credit card and use it to pay for everyday living items, groceries, petrol, utilities etc and then redraw when your credit card statement arrives.
7. Consider a split loan. By fixing a large portion of your loan you can budget to pay minimum repayments on the fixed portion and use the flexibility of a variable loan to make extra repayments and use redraw.
8. Consolidate debt. Consider consolidating your personal loan, credit and store card debt into the variable portion of your home loan. Continue making the regular payments as though they were separate bills and you will pay them off in no time saving you time and money.
9. Consider refinancing or switching. Your circumstances may have changed and your current loan may not be working as well as it could be.
Extra repayments calculator
See what the difference would be if you made an extra repayment on your loan.