Contrary to your initial assumption, consolidating your debts through a loan is not the end of your efforts. In fact, it is only the beginning. Debt consolidation is merely a tool that you use to restructure your monthly payments. After consolidating your debts, you still have a huge balance to pay off. Do not assume that it is already done.
While the road ahead of you is still long, that does not mean you cannot make the process faster. A typical repayment plan will take between a few months to a couple of years. Obviously, people would want to breeze through all of that. Fortunately, there are techniques that you can use so you can achieve debt freedom a lot quicker than you expected.
How to pay your debt consolidation loan faster
There is no question that you need to be smart when taking on debt consolidation. You have to make sure that the program fits your needs and even your financial situation. Only then will it work wonders for you. But even while you are in the program, the road ahead of you might seem too long for your taste. All the payments that you have to make might feel stressful and intimidating. If that is the case, here are a few things you can do to pay off debt consolidation a bit faster.
Use a realistic budget plan
Start by creating a realistic budget plan. When we say realistic, this means being honest with your income and having a list of expenses that you really pay for. Some people create a bare basic budget that is not aligned with their actual lifestyle. They do this to have a higher debt payment fund each month. As a result, they end up living a really restricted life and it compromises their ability to make smarter choices. People who feel restricted sometimes make rash spending decisions. This can endanger your debt payment fund.
It is better to be honest with what you can really afford in terms of debt payments. This will not just help you succeed at getting debt freed. It will also help you pay off debt consolidation loan faster. Not only that, creating a realistic budget will help you identify any expense that you do not need to spend on. It will give you the chance to inspect subscriptions that you can get out of so you can use the funds on your debt payments instead.
Make extra monthly payments
After you have revised your budget plan, it is time for you to see how much you can increase your debt payments. As mentioned, filtering the expenses that you may be able to save on is one of the things that you can work on when you have your new budget plan. Anything that you can save can be put towards your debt payment fund.
Once you have increased the fund, you can opt to pay twice a month instead of just one monthly payment. This will result in an extra payment each year – an equivalent of 1 month’s worth of debt payments. If this is not possible, you can opt to increase your monthly payments by $50 or so. The more you can add, the more you can pay off debt consolidation loan faster. Make sure to inform your lender about this so you can coordinate the change with them.
Pay towards principal
Another thing that you can do to reduce your debt faster is to inform the lender that you want to pay your principal balance. So how does that work?
You should meet the minimum payment first. This is the amount that will be paid towards the interest first and whatever is left will be paid towards the interest. If you add an extra payment, you can specifically tell your lender that you want it credited towards your principal debt. This will lower the balance on your debt – the one that will be used to calculate the interest that will be added in the next billing. Keep on doing this to save on the interest that you will pay. It will also help decrease your balance quickly, thus allowing you to pay off debt consolidation loan faster.
Think of something to motivate you
This final tip will mostly involve your mindset. The truth is, paying your debts faster will require some sacrifice. If you really want to be successful, you should learn how to motivate yourself so you can overcome any obstacle that you will face. Not only that, it will give you the ability to go through any sacrifices that you need to make in order to reach your goal.
There are many ways to motivate yourself. You can think about the amount that you can save. For instance, if you have 0% APR cards, that will result in having no interest on your credit card debt for the next 6 to 24 months. Apparently, that is an effective way to pay off your debts faster. Consider what is important to you so you can figure out how you can motivate yourself to complete all your payments.
Benefits of paying debt consolidation loan faster
You may be wondering, why go through all the effort to pay off debt consolidation loan faster? Here are some of the reasons why you need to get over your apprehension of consolidating debts quickly.
You save money
This is probably one of the primary reasons to pay off your consolidated debt faster. A shorter repayment term means you do not pay a lot of interest. If you can shorten the repayment period by a couple of months, that can really give you a lot of savings in the long run.
When it comes to saving money, you should also consider other factors that will help you save. For instance, you can also save on late penalty fees and charges. This can be done by keeping up with all your payments. However, that is easier said than done for some consumers. According to reports, 1 out of 4 adults fails to always pay their bills on time. Do not be a part of this statistic. You need to pay your dues on time so you can save money on the charges.
You can get started on another financial goal
Another benefit that you will enjoy when you pay off debt consolidation loan faster is being able to start on a new financial goal. It can be saving up for the down payment of your new home or getting a head start on your retirement fund. When you finish paying off your debts, the funds that you allocated for that can be used to finance these new goals. This will help you improve your financial situation and allow you to really enjoy being debt free.