When loan will be paid off

 If you're like most Americans, you owe money toward a large loan. Whether that means carrying thousands of dollars in credit card debt, having a hefty mortgage in your name or making car loan payments each month, loan debt is part of your life. This means you're looking at hundreds of dollars in interest payments over the life of the loan(s). There's also the mental load of knowing you owe perhaps tens of thousands of dollars and that 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 that way.

Did you know there are simple, but brilliant, tricks you can employ to lighten the load? With a carefully applied technique, you can pay off your mortgage, auto loan, credit card debt and any other debt you're carrying quicker than you thought possible. These tricks won't hurt your finances in any dramatic way, but they can make a big difference to the total interest you'll pay over the life of the loan and help you become debt-free faster.

You can free up more of your money each month, use your hard-earned cash for the things you want instead of forking it over in interest and live completely debt-free sooner than you'd dreamed. It's all possible!

A note of caution before we explore these tricks: Check with your lender before employing any approach, as some loan types have penalties for making extra or early payments.

1. Make bi-weekly payments

Instead of making monthly payments toward your loan, submit half-payments every two weeks.

The benefits to this approach are two-fold:

Your payments will be applied more often, so less interest can accrue.

You'll make 26 half-payments each year, which translates into an extra full payment on the year, thereby shortening the life of the loan by several months or even years. If you choose this method with a 30-year mortgage, you can shorten it to 26 years!

2. Round up your monthly payments

Round up your monthly payments to the nearest $50 for an effortless way to shorten your loan. For example, if your auto loan costs you $220 each month, bring that number up to $250. The difference is too small to make a tangible dent in your budget, but large enough to knock a few months off the life of your loan and save you a significant amount in interest.

For a potentially even bigger impact, consider bumping up your payments to the nearest $100.

3. Make one extra payment each year

If the thought of bi-weekly payments seems daunting but you like the idea of making an additional payment each year, you can accomplish the same goal by committing to just one extra payment a year. This way, you'll only feel the squeeze once a year and you'll still shorten the life of your loan by several months, or even years. Use a work bonus, tax refund, or another windfall to make that once-a-year payment.

Another easy way to make that extra payment is to spread it out throughout the year. Divide your monthly payment by 12 and then add that cost to your monthly payments all year long. You'll be making a full extra payment over the course of the year while hardly feeling the pinch.

4. Refinance

One of the best ways to pay off your loan early is to refinance. If interest rates have dropped since you took out your loan or your credit has improved dramatically, this can be a smart choice for you. Contact Horizon to ask about refinancing. We can help even if your loan is currently with us.

It's important to note that refinancing makes the most sense if it can help you pay down the loan sooner. You can accomplish this by shortening the life of the loan, an option you may be able to afford easily with your lower interest rate. Another means to the same goal is keeping the life of your loan unchanged and with your lower monthly payments, employing one of the methods mentioned above to shorten the overall life of your loan.

5. Boost your income and put all extra money toward the loan

A great way to cut the life of your loan is to work on earning more money with the intention of making extra payments on your loan. Consider selling stuff on Amazon or eBay, cutting your impulse purchases and putting saved money toward your loan, or taking on a side hustle on weekends or holidays for extra cash. Even a job that nets you an extra $200 a month can make a big difference in your loan.

Triumph over your loans by using one or more of these tricks to make them shorter and pay less interest. You deserve to keep more of your money!

If you borrowed money to pay for school, your first question might be how best to pay off your student loans. The short answer is that there's no magic bullet, but there are definitely things you can do to make paying back education debt easier. Student loan debt reached an all-time high of $1.61 trillion in 2021, so you're not alone.1 A growing segment of the economy is devoted to helping Americans figure out how to pay off student debt, and there's a lot to learn.

Start by reading this overview to understand the basics. Then learn about and consider various options, such as loan consolidation, loan deferment, or forbearance, and think about how you will work paying student loans into other financial goals, such as saving for a down payment on a home. There are even plans that allow for loan forgiveness, as you'll see below. Now, review these nine tips to help you get a handle on your student loans—and even pay them off faster.

KEY TAKEAWAYS

Know how much you owe to whom it's owed, and what your monthly payment and interest rate are for each loan.

Find the best repayment schedule—one that's either fast or slow—for your situation.

Consider making payments during your grace period—toward the total loan amount or at least the interest due. Note that interest on student loans from federal agencies and within the Federal Family Education Loan (FFEL) Program has been temporarily suspended until May 1, 2022.2

Look into payment options that can whittle down your debt, such as paying more each month or making bimonthly payments, setting up autopay, and applying windfalls such as bonuses, tax refunds, or cash birthday gifts to the principal.

See if consolidating or refinancing your loans will lower your interest rate and speed the payoff of your loans.

1. Know What You Owe

The first step in repaying student debt is knowing what you owe. If you haven't done this yet, take time to figure out:

• The total amount you owe on all of your loans
• Which student loan servicers you owe money to and the amount for each loan
• Which of your loans are federal and which are private
• The minimum monthly payment for each loan
• The interest rate for each loan
• Once you've done this, you can move on to the next step, which is choosing a repayment plan.

2. Evaluate Student Loan Repayment Options

How you repay your loans depends on three things: the type of loans you owe, how much you can afford to pay, and your money goals.

"Financial goals are different for everyone," says Joe DePaulo, CEO and co-founder of College Ave Student Loans. "Some may want a longer repayment plan that allows more flexibility in their monthly budget, while others may opt for a repayment plan that allows them to pay off their student loans as quickly as possible."

There is a range of student loan repayment options to consider. If you need flexibility and you owe federal student loans, you might look at an income-driven repayment plan. There are several choices that calculate your monthly payment based on your income and household size and allow you more time to repay your loans than you'd get on a standard 10-year repayment plan.

On the other hand, if you want to repay your loans as quickly as possible, you might want to stick with a repayment plan that has the shortest term. The trade-off is that you'll have a higher monthly payment. The best way to evaluate loan repayment options is to use a loan repayment calculator, such as the one offered by the Department of Education.3

 Income-driven repayment plans can offer loan forgiveness after a set number of years, but any forgiven loan balance may be treated as taxable income.4

3. Use the Grace Period to Your Advantage

Whether you have a grace period and how long it lasts with private student loans depends on the lender. The grace period is the time frame in which you aren't required to make payments on your loans.

With federal student loans, the grace period typically lasts for the first six months after you leave school.5 With private loans and unsubsidized federal loans, keep in mind that interest is still charged during your grace period and will be capitalized—added to the total amount you owe—after the grace period ends.6

One way to make the grace period work for you is to make advance payments against your loans. Paying down some of the principal means less interest that accrues later. At the very least, try to make interest-only monthly payments in the grace period to cut down on what you owe.

Note that interest on student loans from federal agencies was temporarily suspended until May 1, 2022, which should help reduce the total amount you owe when you graduate.7 As of March 30, 2021, this relief was also extended to loans in the Federal Family Education Loan (FFEL) program.8 Even with federal loans, it still makes sense to try to pay down federal loan principal during this period.

4. Consider Consolidating or Refinancing Student Loans

Consolidating and refinancing offer two ways to streamline student loan repayment. With debt consolidation (or student loan consolidation), you combine multiple loans together at an interest rate that reflects the average rate paid across all of your loans. This can be done with federal student loans to merge multiple loans (and monthly loan payments) into one.

Refinancing is a little different. You're taking out a new loan to pay off the old loans, so you still end up with one monthly payment. But if that new loan has a lower interest rate compared to the average rate you were paying across the old loans, you could save some money—provided you don't extend the term. One thing to note about refinancing private student loans is that you'll need good credit to qualify, which may necessitate bringing a cosigner on board.

Be very careful to avoid student loan scams, which are particularly prevalent if you try to refinance your loans or investigate loan forgiveness.

 You can refinance federal and private loans together into a new private student loan, but doing so will cause you to lose certain federal loan protections on your federal loans, such as deferment and forbearance periods.

5. Pay Your Loans Automatically

Late payments could hurt your credit score. Scheduling your loan payments to be deducted from your checking account automatically each month means you don't have to worry about paying late or damaging your credit.

You could also score some interest rate savings if your lender offers a rate discount for using autopay—federal loan servicers and many private lenders do. The discount may only be a quarter of a percentage point, but that can make a difference in how quickly you pay off the loans over time.