How to Quickly Reduce Interest Rate on your Loans and Start Saving Money
Whether a mortgage, car loan, business loan or a personal loan, use the following tips to bring down the cost of interest and pay off your loan sooner.
Throw “Unexpected” Money at the Loan
If you have run into some money – perhaps you have received a bonus check, won lottery or whatnot – ensure that it all goes into paying off your loan. By reducing your loan balance, you will end up paying far less on interest charges.
Increase Repayment Frequency
Paying regular monthly repayments means that you’ll pay higher interest charges. By paying fortnightly or even weekly, you will reduce your loan principal as well as the amount you’ll shell out on interest. In fact, some lenders will allow you to split your monthly repayment and pay bi-weekly.
You see, this is simple math. If you make payments fortnightly, you will eventually make 26 half payments each year. That’ll all add up to 13 full monthly payments instead of the regular 12. It is a smart way to pay off your loan earlier and reduce interest rates.
Round Up Your Monthly Repayments
You must have realised that most monthly repayments are figures like $416.97. So, before the lender whisks away the recommended amount, consider rounding your repayments up to the nearest $100 or even $50. This will allow you to repay your loan faster and enjoy lower interest rates.
Take Out Secured Loans
If you have collateral such as a car or house, it is best to tie your personal or business loans to your property. In most cases, banks and alternative lenders charge more interest on unsecured loans than ones you have provided security.
If you have a home loan or mortgage, for instance, it is always important to always review your lender. After 3-4 years, you can refinance your loan so that you can enjoy more flexible terms and a lower rate of interest.
Consolidate Your Loans
If you have several loans, it can become difficult to keep track of due dates, interest rates, and repayments. By consolidating all your loans into one simple debt, you will have an easy time managing your finances. Even better, combining your loans gives you an opportunity to negotiate a lower interest rate.