Tips to reduce interest on your loan
Australia is now reported to have some of the highest personal debt levels in the world. If you’re like most Aussies, chances are you may owe money on a loan, credit card, or buy-now-pay-later services.
Regardless of the loan purpose, there’s the mental load of knowing you owe money and you’ll be paying back the loan for years to come. It can all get kind of depressing, but it doesn’t have to be this way.
Did you know there are simple, but clever, tricks you can use to pay off your loan quicker than you thought possible? They could make a difference to the total interest you’ll pay over the life of the loan and help you become debt-free faster. Read on!
- Make more frequent repayments
If you’re currently making monthly repayments, you may want to consider switching to fortnightly or weekly repayments. This is an effective strategy because you’ll be paying the same repayment amount per month, but less interest will be incurred. More of your repayment amount goes to reducing the amount you owe.
- Round up your monthly payments
Round up your monthly payments to the nearest $50 if you can. For example, if your loan costs you $220 each month, bring that number up to $250.
- Make extra payments
Making extra payments towards your loan can have a significant effect on reducing the overall interest charged. So if you have some spare savings or received an unexpected windfall, it might be a good idea to consider using at least some of it to make an extra payment.
- Every dollar counts
Even putting an extra $1 a day towards your loan ($30 a month) can have a substantial impact on the interest costs over the life of your loan. So if you do have a subscription you don’t need or a gym membership you don’t use, that money could be helping you pay off your loan sooner.
- Set up automatic payment
By setting up an auto-debit in your bank account, you will never forget a loan payment and eliminate the chances of defaulting. This will also help you in avoiding any fines or late payment charges. Just remember to have enough money in your bank account for when the payments are due.
- Improve your credit score
If you know that you will need to take a loan in the future, it is important to work on improving your credit score beforehand. Customers with higher credit scores are not only eligible for higher loan amounts but also usually get lower interest rates. This is because they are deemed safe and creditworthy by lenders. Here you can find our tips on how to improve your credit score.
We hope our suggestions will help you triumph over your loans and keep more money in your pocket.
If you’re short on cash and need a helping hand, Credit24 could help with a loan up to $10,000. Click here to find out more.
General advice warning
This article contains general advice and does not take into consideration your personal circumstances. All strategies and information provided on this website is of general advice only. We recommend you seek personal financial and taxation advice prior to acting on this information.