Blog: Top 5 tips to pay off your loan faster
If you want to get debt-free faster, there are a few easy ways to knock a few years off your home loan and save money by reducing the amount of interest charged.
First and foremost, you should ensure you have a home loan that best suits your needs. You should then work out a budget to determine how much you can comfortably afford to pay each month. From there, you can try to shorten the life of your loan and save money in the long run.
Make payments fortnightly rather than monthly
By paying every two weeks rather than every four, you can actually sneak in an extra payment.
If you paid $1,000 per month you would knock $12,000 off your loan each year. However, if you dropped it down to $500 every two weeks, you would actually end up paying $13,000 over the year.
Chances are you wouldn't even notice this extra repayment, so it could be a nice easy way to chip away at the balance. This works particularly well if your salary comes through fortnightly.
If you are paying $480 towards your loan each fortnight, chances are you already round it up in your head to $500, so why not just pay the larger amount? You may hardly notice, but you'll be putting another $500-plus away each year.
Use spare change
Cash users can benefit from a simple trick. Save the gold coins you get as change and only use paper money and cards. These add up quickly! Once you have a decent amount saved, pop down to the bank and cash it in on your loan.
Use your tax refund and annual bonus
Any extra benefits not in the current budget can easily be credited towards your mortgage – you won't miss what you've never had.
Whether it be your tax refund, a lottery win or the extra from your annual bonus – put it on your home loan. Every little bit helps you reduce payments over the long run.
If you receive a sizable bonus from work it might be worth considering refinancing and reducing the term of your loan.
Pretend the interest rate is higher
Interest rates often fluctuate, so one way to pay off your mortgage is to pretend you are being charged a higher rate than you are.