Paying off student loans could take a long time and be hard. However, if you are smart and disciplined then you could easily pay it off completely in the shortest possible time. In this article, we are going to give you the 5 best ways of paying student loans. Let’s get started.
5 Best Ways to Pay Student Loans
Choose The Right Way To Make Extra Payments
There doesn’t exist any penalty for pre-paying your student loans or paying more than the bare minimum. Therefore, you can most certainly try to make an additional payment every month to pay off your student loans quickly. You can also make one large lump-sum payment on the due date as well. Either way, you will stand to save a lot of money.
Try to Enroll in Auto pay
You can consider signing up for auto-pay if you don’t want to refinance your loans. It is another great way to lower your student loan interest rate significantly. Federal student loan servicers happen to offer a quarter-point interest rate discount only if you allow them to deduct payments from your bank account automatically. Many private lenders also offer auto-pay deduction as well so take note of it.
Consider Making Bi-weekly Payments
Making bi-weekly payments is a very good and simple strategy when it comes to tricking yourself into paying extra on debt. Every two weeks try paying half of your payment instead of making one full payment every single month. You will soon observe that you have ended up making an extra payment every single year. This will help you shave off a lot of time from your repayment schedule. It will also help you shave off some dollars from your interest costs as well.
Try to Pay Off Capitalized Interest
Interest on your student loan will accrue while you are in school, in your grace period as well as during periods of deferment and forbearance unless your loans happen to be subsidized by the federal government. That interest always capitalizes when your repayment period begins. This means that your balance grows and then it leads to you paying interest on an even larger amount. Therefore you should consider making monthly interest payments while it’s accruing. This will help you avoid capitalization. You can also try making a lump-sum interest payment before your grace period or when your postponement happens to end.
Consider Sticking to The Standard Repayment Plan
The U.S government tends to put all federal student loans on a 10-year repayment timeline automatically. Take note that this is done unless you happen to choose differently. Therefore if you are someone who cannot make big extra payments then the fastest possible way for you to pay off your student loans would be to stay on that 10-year standard repayment plan itself.
Federal student loans also offer income-driven repayment plans. These plans can very easily extend the payoff timeline to 20 or 25 years. So make sure that you choose the option that fits you the best.
This brings our discussion on five best ways to pay off student loans to an end. Now do let us know some of your thoughts on the same.
