1. Pay back more than the recommended repayments
The first and most obvious strategy is to exceed the recommended repayments. And by paying off your personal loan quicker than expected, you'll pay less in interest than expected.
2. Avoid minimum and interest-only payments
Speaking of recommended repayments, wherever possible you should avoid minimum and interest-only repayments on any loan. These repayments don't actually repay the loan at all - you're simply servicing it, prolonging the loan term and increasing the amount of interest you pay. The principal stays exactly where it is, and you don't move any closer to relieving yourself of debt.
3. Consider fortnightly payments
When you make payments twice as often you repay your debt twice as fast! You don't necessarily need to double the amount of debt you repay every month, but smaller, more regular payments may be more manageable than a single monthly lump sum.
4. Make lump sum payments
Have you recently come into money, whether in the form of inheritance, a prize or a bonus at work? Avoid the temptation of splurging, and direct as much money as you can to your debts. Ultimately this will give you more money to spend on fun down the track.
5. Earn extra income
Paying off debt can be the perfect reason to start that side hustle you've always thought about. Whether you're considering starting your own little business, taking up a gig or freelance work, or simply selling all those high-priced items that you haven't touched in years, a bit of extra income can be very handy for those looking to pay down debt quickly.
6. Prioritise by interest rate
If you have multiple loans, you should work to pay back those with the highest interest rates first, as they will be the most expensive in the long run.
7. Consolidate your debt
Those multiple loans might be ripe for consolidation. This is where your different loans are brought together within the one finance package. For example, it is common for high-interest credit card debts to be consolidated into a comparatively low-interest personal loan, which both reduces and simplifies your monthly repayments.
8. Adjust the loan term
Another option is to adjust the length of your loan term. If you're struggling to keep up with repayments, you might consider lengthening the term, but this will only make the loan slower to repay. If you can keep up with higher repayments it's wise to shorten the loan term, as this will save you money overall.
9. Try to improve your credit score
Refinancing, consolidating and changing the terms of a loan rely on a decent credit score. If you work to improve yours you'll gain access to more financing options and better interest rates.
10. Make a dent with small extra payments
Every dollar counts, and small additional payments can make a big difference in the long run. If you have some spare money sitting in your account, repay your loan. Consider making it a habit: set a weekly budget and send whatever is left unspent on Sunday to your loan.
11. Tighten the purse strings
Speaking of budgeting, the best way to devote more money to loan repayments is to spend less elsewhere. Check your bank statements to identify areas of unnecessary spending. Set a budget and work within it. You might be surprised at how much fun you can have for free!
12. Aim to be debt-free
Your ultimate goal should be to be free of debt. So, when you do manage to pay off that credit card or loan, it's wise to close it.
Consolidate your debt today
At Instant Finance we've spent over 50 years helping Kiwis better manage their money, by consolidating high-interest debt into customisable personal loans with lower rates and fairer terms.