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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our content is written by professionals with a lot of experience and is edited by experts in the field to make sure it is fair, correct, and reliable.
Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo.
A loan can feel like a heavy weight hanging over your head. The long repayment term, monthly payments, and interest that builds up can be hard on your mind and your wallet. But what if I told you there were ways to get out of debt faster than you thought? With the right strategies and techniques, you can settle your loans quickly.
In this comprehensive guide, we’ll explore the ins and outs of early loan repayment so you can save money, reduce stress, and achieve financial freedom. Whether you have a mortgage, auto loan, student loan, or credit card debt, you can employ these tactics to pay them off ahead of schedule.
Why Settle Loans Early?
Before jumping into the repayment strategies let’s look at all the benefits that come with settling loans faster
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Save money on interest payments: If you make extra payments on the principal, you pay less interest over the life of the loan. This can mean thousands in savings.
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Shortened loan term – By paying more than the minimum due, you can knock months or even years off your repayment period
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Better credit score—Being a good debt payer can raise your credit score, which can help you get better loans in the future.
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Reduced financial stress – Eliminating loans quickly lifts the psychological burden of debt and provides financial freedom
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When you pay off your loans, you’ll have more cash flow. You can use this extra money to save, invest, or buy things you need and want.
Top Strategies to Settle Loans Faster
Now, let’s explore proven techniques to help you repay loans ahead of schedule:
1. Make Extra Payments
The simplest way to pay off loans faster is to make extra payments when possible. Even small amounts go a long way. Consider putting windfalls like tax refunds or bonuses toward extra principal payments. Automating additional payments each month knocks time off your repayment schedule.
2. Increase Payment Frequency
Instead of monthly installments, consider bi-weekly or weekly payments. This increases the number of payments annually, reducing interest charges and paying off the loan sooner. Arrange automated payments for consistency.
3. Round Up Monthly Payments
Round your regular payment up to the nearest $50 or $100. This relatively small amount can significantly speed up repayment. For example, rounding a $200 car payment up to $250 cuts months off the loan term.
4. Refinance the Loan
If interest rates have dropped since you originated the loan, refinancing could lower the rate and monthly payment. Use the savings to pay off the balance faster. Run the numbers to ensure it makes financial sense.
5. Pay Half on Paydays
On paydays, pay half of that period’s regular payment. This adds an extra monthly payment annually, cutting down the time until the loan is settled. Arrange automated payments for consistency.
6. Spend Less and Save More
Review expenses to identify areas to cut spending. Redirect those savings toward extra principal payments. Small lifestyle tweaks like eating out less and minimizing impulse purchases make a difference.
7. Earn More Income
Consider taking on a side gig or finding a higher paying job. Use that supplemental income solely for extra loan payments to knock down the principal. The more cash flow, the faster you can settle debts.
8. Consolidate Loans
Consolidating multiple high-interest loans into one lower fixed-rate loan simplifies repayment. The singular payment is usually less, allowing you to pay off the balance quicker. Run the numbers to ensure it makes sense.
9. Pause Retirement Contributions
Temporarily pausing retirement account contributions gives you extra cash for loan payments. Once major debts are settled, redirect funds back to retirement savings. Only do this if on track for retirement.
10. Line Up Your Debts
Utilize the debt avalanche or debt snowball methods to systematically pay off loans. The avalanche tackles highest interest rate debts first. The snowball pays off smallest balances first. Knocking out loans frees up cash flow.
Tips for Success
Follow these tips to ensure you settle loans intelligently and efficiently:
- Automate payments for consistency and avoid late fees
- Track your progress monthly to stay motivated
- Avoid taking on new debts during repayment
- Seek balance transfer or personal loans if they save on interest
- Surround yourself with supportive people to stay encouraged
- Celebrate each loan you pay off to build momentum
The Bottom Line
With persistence and the right strategy, you can settle loans remarkably faster than the original repayment schedule. The benefits of accelerated debt reduction include improved cash flow, savings on interest, reduced stress, and a sense of accomplishment. Use this guide to make a plan and commit to consistent follow-through. Before you know it, you’ll be debt-free and empowered.
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The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
- • Mortgage Loan Originator (MLO)
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- • Personal loans
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Denny Ceizyk joined the Bankrate Loans team as a Senior Writer in 2023, providing 30 years of insight from his experience in loan sales and as a personal finance writer to help consumers navigate the lending landscape on their financial journeys.
- • Auto loans
- • Personal loans
Calendar Icon 8 Years of personal finance experience Kellye Guinan is an editor and writer with over seven years of experience in personal finance.
Bankrate is always editorially independent. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Our is to ensure everything we publish is objective, accurate and trustworthy. Bankrate logo
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo
Pay extra when you get extra money
If you want to make bigger steps toward early payoff, apply larger payments to your principal when you receive extra cash. Use some or all of the funds received from a holiday cash gift, a year-end bonus or a tax refund to hack away at your loan balance.
Keep the following considerations in mind when deciding whether to use this method:
- You may need to contact your lender directly to make sure they apply the amount to your principal balance.
- Your payment won’t go down like it would if you paid down your balance on a credit card.
- Cover other financial bases first. For example, if you don’t have at least $1,000 in an emergency fund, deposit cash to cover that before you apply a large amount to your personal loan balance.
Best Way to Pay Off Debt Fast (That Actually Works)
FAQ
What is the quickest way to pay off a loan?
One of the best ways to pay off a loan faster is to make a smaller payment every two weeks. Doing this can shorten the life of your loan.
How can I finish my loan fast?
Steps to Repay Home Loan FasterMake Pre-Payments. Regularly making pre-payments towards your home loan can significantly reduce the outstanding principal. Opt for Higher EMIs. Choose a Shorter Tenor. Make a Larger Down Payment. Consider a Balance Transfer. Utilise Tax Benefits. Avoid Missing Payments.
How much would a $5000 loan cost per month?
A $5,000 loan would typically cost between $100 and $300 per month, depending on the interest rate and loan term. Factors like your credit score, the lender, and the loan’s length will affect the exact monthly payment.
Can you get an early settlement on a loan?
Tell the lender you want to pay the loan off early You’ll then have 28 days from when they received your request to pay the amount off in full. Just because you asked for an early settlement figure doesn’t mean you have to go through with it. You can choose to carry on with your usual payments instead.