Every month, you make the minimum payments against your installment loans and lines of credit. And every month, it seems like your balances barely change. If you’re tired of carrying around debt that ties up your precious cash, it’s time to pay these loans off earlier than you planned.
Why Should You Repay Your Online Loans Early?
When it comes to installment loans, clearing your debt frees up your monthly budget. You’ll have more money to put toward other bills, savings, or splurging on something fun.
If you have a line of credit, paying off your balance means you’ll have money on standby for the next emergency, provided you have available credit, and your account remains in good standing. That applies to your line of credit, whether you’ve taken out online loans in Tennessee, Kansas, or Missouri. It may even reduce what you owe in charges or interest, depending on your lender.
How to Repay Your Online Loans Early
Now you know the “why”s behind putting your spending power into debt repayment, let’s move onto the more important question of “how.” The answer isn’t always intuitive, especially if you’re on a tight budget, but it’ll come easier once you get the hang of it.
Here are some tips to help you get started.
1. Read Your Terms
While some online direct lenders encourage their borrowers to make early or extra payments, others will punish you for it. If so, they’ll apply a charge for any extra payment you make above and beyond your scheduled ones.
Check your loan or line of credit contract to see if there’s a clause about pre-payments. If there’s no charge, you’re free to move onto the next tip. However, if there is a fine, you’ll have to weigh the cost-benefits of paying early. It may not be worth paying this charge.
2. Pick up a Side Gig
Your income represents the cold, hard limit of your spending powers each month. If you don’t have a lot of wiggle room, consider joining more than half of U.S. adults who have side gigs. These part-time jobs or contracts can insulate your budget, giving you more money to put toward your bills.
3. Reduce Your Expenses
Until you start earning more, another way to find more money in your budget is by reducing your spending. Every budget has discretionary expenses that tie up cash better used elsewhere — whether that’s too many streaming services or a costly takeout addiction. While it may be hard to say goodbye to these splurges, it won’t be forever.
If you don’t make many unnecessary shopping trips, you’ll have to review your utilities, housing costs, and other regular bills for savings. That means taking a hard look at your energy consumption, cell phone plan, insurance packages, and even where you live.
4. Don’t Touch Your Savings
Discretionary expenses are fair game, but your savings are off-limits. You should keep up contributing to your emergency and retirement funds even while you focus on your debt.
Online loans may come and go, but emergency savings and retirement investments are constants in your budget. You have to keep up with their contributions for them to be an effective safety net for emergencies or your golden years.
If you want to see a big, fat zero on your next billing statement, you’re going to have to make some changes — but not too many. Keep saving up for your future as you tackle your debt. With a solid emergency fund, you may face your next bill without needing an installment loan or line of credit.