Asking yourself how to pay down a loan faster? Don’t let your debt get you down!
Got a loan? Same! You and I are just like millions of Canadians that have a student loan, an auto loan, a personal loan, or another kind of loan. And you, me, and everyone else want that sucker gone, like, tomorrow.
We’ve got some ideas that might help. Learn how you could pay down your loan faster here in just three easy steps.
3 Ways to Pay Down a Loan
Just so you know, this article is about paying down loans rather than credit card debt. Credit card debt can be a different animal—a scraggly, rabid, one toothed, one eyed, yucky lil’ monster. These methods could be useful when paying down loans like personal loans, which have a fixed maturity date, a set amortization schedule, and aren’t circular like credit card debt.
Method #1 - Switch to Biweekly Payments
Many mortgage terms, for example, have a default schedule that is based on monthly payments.
You could consider switching your loan payment schedule from monthly to biweekly. This doesn’t mean doubling up on your payments, but rather, halving them and repaying your loan in smaller but more frequent increments.
Depending on how interest is assessed on your loan—daily, weekly, monthly or annually—this strategy could save you money over time. This is because with frequent payments, more money can be directed towards your principal balance.
Switching to biweekly payments also actually lets you sneak one extra payment in every year. One payment per month equals twelve payments per year. Biweekly payments allow you to make 26 payments per year—or, 13 “monthly” payments.
It’s important to note that not all loans will allow a biweekly repayment schedule—partially because it is a more efficient and cost effective way to pay down your loan. Talk to your loan administrator to see if this option is available to you.
Method #2 - Round Up Your Payments
This is a simple way to pay your loan down faster without stressing about it. If your lender requests a minimum payment of $575 per month, for example, consider rounding up to $600. This is only $25 extra per month—money you may not even miss!—but over the course of the year, you’d be $300 ahead of schedule.
Over time, that adds up.
Again, not all lenders will want you to pay off your loan quickly, so they may not allow you to make higher payments. If that’s the case, it might be worth finding a loan consolidation option, or trying to renegotiate your loan terms to potentially expedite the repayment process.
Method #3 - Revisit Your Loan Terms
The terms of your loan are your repayment bible. If you’re locked in for fixed monthly payments for 10 years with no option to make extra payments, there’s little that can be done to speed up your repayment. Not adhering to your loan terms—even by overpaying—can actually bring on penalty fees. Dumb? Yes.
Again, loan terms are often set in certain fashions to create profit for the lender. When you receive a loan, you are charged interest. If you were to pay off your loan in its entirety after one month, the lender would not earn any profit for loaning you money from your interest payments. Instead, lenders prefer you to pay back your loan in smaller increments over time.
So! If your loan doesn’t have favourable terms, you could inquire about renegotiating. This could mean using a debt consolidation service to move your loan to another lender; you could consider refinancing your existing mortgage; or, your lender may be open to making changes to your loan terms without a fuss.
These are popular repayment options you may wish to discuss with your lender:
- Earning one “free” payment per year with monthly instalments, for a total of 13 payments per year
- 20.5% on the next $48,534 of taxable income (on the portion of taxable income over $48,535 up to $97,069), plus
- Switching to biweekly payments
- Renegotiating your interest rate
- Increasing your payments to the next round hundred or thousand dollar mark
- Reducing the term of your loan so you accumulate less interest over time
Talk to your lender to see what options are available to you!
Pay down your loan with MogoWe offer loans here at Mogo, did you know that? Having a loan—in the form of a mortgage, a personal loan, or whatever—is nothing to be ashamed of, but it’s your responsibility to manage your debts carefully.
If you’re in need of a loan, check out our available products and get pre-approved here in just three minutes.1 Our product specialist team can answer all of your questions, and our loan platform, which is managed in-app, is super transparent and geared toward helping you manage your payments efficiently.
|GET A LOAN WITH MOGO|
Our Mogo Visa* Platinum Prepaid Card is also a useful tool to help pay down debt. It’s a totally free prepaid card that can help prevent you from overspending, so you’re able to save up and take advantage of extra loan payments every year.
|GET MY FREE MOGOCARD|
Don’t stress about your loan, just be smart in how you manage it. Talk to your lender today about how you can pay down your loan faster. You’ve got this!
This blog is provided for informational purposes only, is not intended as financial advice, and is not meant to suggest that a particular loan product or financial strategy is suitable for you. If you’re unsure about a particular financial decision, such as obtaining a personal loan or other loan product, you may wish to obtain advice from a qualified professional.
*Trademark of Visa International Service Association and used under licence by Peoples Trust Company. Mogo Visa Platinum Prepaid Card is issued by Peoples Trust Company pursuant to licence by Visa Int. and is subject to Terms and Conditions, visit mogo.ca for full details. Your MogoCard balance is not insured by the Canada Deposit Insurance Corporation (CDIC). MogoCard means the Mogo Visa Platinum Prepaid Card.
1-Pre-approval is based on information submitted in your MogoAccount application and/or other information that indicates you could meet our underwriting requirements. Your pre-approval for credit remains subject to our credit approval process which includes but is not limited to income and identity verification and validation of information submitted through the Mogo.ca website. To meet our underwriting requirements further documentation may be requested from you. Minimum income requirements may apply for some products. Approval is not guaranteed and we reserve the right to deny services to you. Final approval is subject to review and verification of income and supporting documents provided.