Essential Tips for Repaying your Loan Sooner

How can I make my Loan disappear sooner?

Many people ask this question because they want to complete their financial obligation quickly. They don't want to spend their hard-earned money on interest payments. I consulted a number of professionally qualified and expert finance brokers and they suggested some simple steps to help you reduce the life of your loan and lower your interest repayment, such as:

1. Make More Frequent Repayments

Making weekly or monthly repayments can take months or even years off your loan and can also help you save thousands of dollars in interest payments

2. Setup Your Repayment Period

If you setup your repayments to coincide with when you get paid, it will help you to pay off your loan sooner (E.g. if you are paid fortnightly you should set up repayment period as fortnightly)

3. Deposit Any Spare Cash

If you have any spare cash, you must consider depositing this spare cash into your loan account as a lump sum payment

4. Have Your Salary Directly Credited

Having your salary directly credited will reduce your loan amount considerably over time

5. Do Not Lower Your Repayments

If your minimum regular loan repayment drops as a result of falling interest rates, you should not lower your repayment. By maintaining your current repayment, you will pay off your loan sooner.

6. Increase Your Loan Repayments

If you have the flexibility in your loan account to allow you to increase your loan repayments, you should consider this option, particularly after a pay-rise.

7. Use 100% Offset Account

If you have the capacity to link your loan account to 100% offset account, you should take advantage of this as this has the overall effect of repaying your loan sooner (E.g. if your mortgage is $400,000 and you have $20,000 in the offset account you will only pay interest on $380,000)

8. Pay More Than The Minimum Repayment

Just pay a few extra dollars each month when you make a repayment and you will be surprised as how quickly this all adds up.

You can use an "Extra Repayment" calculator to work out for yourself what your extra repayments might have on your loan. The Extra Repayment calculator is a very useful calculator which will help you to calculate, how many times and how much interest you can save by paying more than your minimum repayment.

Example of how the Extra Repayment Calculator works

Example: The benefits available to you in making the extra repayments are best illustrated in the following example. The example assumes that you are willing to contribute an additional amount of $200 towards your weekly repayments:

Loan Amount: $530,000

Normal Loan Term: 30 years

Interest Rate: 5.00%

Repayment Frequency: weekly

Normal Weekly Repayment: $656

Additional Weekly Repayment: $200

Interest saved by making additional or extra repayments: $217,815

Time in years saved, by making additional or extra repayments: 11 years 10 months

So, this is how you can repay your loan quicker and save money. If you have doubts regarding repaying your loan quicker than usual, you must use the calculator or consult a finance broker. He/she will guide you through your options in repaying your loan sooner.