Many of us have student loans, but I’m sure a large number of us don’t really know much our student loans and interest rates. It’s so easy to leave our loans sitting there, paying only the minimal required amount while the loan actually grows in size or the principal loan amount doesn’t really change. Knowing exactly how much you owe can go a long way in motivating you to pay your loan off as quickly as possible. Here are my tips for getting your student loan under control:
1. Know What You Owe
Find out the current loan balance – see how much of it comes from the principal loan amount and how much is comprised of interest. Being realistic about what is owed and where it comes from can help you feel more motivated to pay it back quickly. Compare what you owe to your repayment rates and check in to see if you are paying a realistic amount.
2. Be Aggressive
You will want to pay your loan back as quickly as possible to avoid unnecessary interest charges. Usually, the minimum repayment rate does not do a lot to pay back the principal of the loan. You can use an online calculator to see how long it will take you to pay back your loan at your current repayment rate. Try to find one with options to change the repayment amount, so that you can see how much faster you could pay it back by increasing your repayment rate. Even a hundred dollars a month can make a big difference in when you will pay back your loan.
3. Consider Refinancing Your Loans
Take a serious look at the interest rate on your loans and compare it to other types of loan. Sometimes it could make more sense to refinance your loans in order to get a better interest rate. A lower interest rate of 0.5% may not seem like a lot, but over the course of your loan, you could actually save thousands of dollars. Considering how large loans can be, especially if you did any postgraduate study, a small change in the interest rate can make a substantial difference to how long your loan takes to pay and how much you pay in total.
While dealing with student loans can be overwhelming, making these three small changes can make a big difference to your financial situation. Paying your loans off faster will ensure you don’t spend as much on interest, help you get debt free and also leave you with extra money you can spend or save however you like.