Figures have indicated that upon graduation, a student/has an average of $30,000 in student loans. The time stipulated by the government to pay these loans is 10 years. However, a majority of these students take as long as 20 years to 25 years to service their debts. Although paying off student loans may seem like a daunting task, there are several repayment strategies that can help you achieve your goal. Therefore this article provides some exciting ways to finish up your loans in time and save on it as well. You have to note that student loans are never written off.
Hence, you can have them on your credit portfolio for life. If they take this long, they are likely to affect your credit history negatively. You are bound to have lenders remind you of the credit obligations you have failed to respond to. This may not be a good indicator since you need those lenders to approve your mortgage or business loan at some point in time. As they say, the best remedy to debt is to pay it off. Needless to add that you need it paid in the least time possible. Having a loan dragging on your shoulders for long is not what you need in this current economy.
Payment strategies
1. Register for auto-pay
Through auto-pay, you are allowing the lender to automatically deduct a certain percentage of your wages or salary to cater for the payment of the loan. Some lenders even offer discounts for those who sign up for this service. And, since this means is going to guarantee you make all your yearly deposits on time, some lenders are likely to give you a significant discount for this. So, for signing up and making your annual payments in time separately assures you a sizeable discount and hence guaranteed to save on your payment. You may as well get an offer to reduce your interest rates by 25% or 50% depending on the lender. Therefore, whichever the deal, you will definitely make that save which you can as well use to your advantage by paying more.
2. Choose the best plan for you
A more aggressive payment plan is likely to save you a substantive amount than longer payment periods. The reasoning behind n this is the fact that your loan amounts are calculated on an annual basis basing on the rates applicable to your case. As you extend your loan periods, you are as well as increasing the amount payable yearly. The government usually offers graduates the ability to extend their payment plans to margins most suitable to them (from 10, 15, 20, 25 years). Still, financial consultants would direct otherwise, if you can summarize the period, say from 20 years to any tome less than 10 years, then you are likely to get pay and get out of debt the soonest and in the event, have saves some percentage on the initial loan amount.
3. Deposit the extra funds you make to your loan account
Extra funds can be defined as the profits you earn, salary raise, bonuses, inheritance, and tax refunds. Having the extra money you earn dedicated to loan repayment serves to ensure the loan principal is reduced so that you will have less to pay over the years going forward. The objective here is to reduce the period within which you will be making the loan deposits so that you can save some thousands in the end. This mode of extra payment does not mean that you have to shelve the monthly deposit requirements as you need to pay the mandatory deposits along with the additional payments. Or, put all the extra coins you make on these small projects on loan payments.
Your life doesn’t have to stop because you have a student loan. Many have had these loans, and they did just fine with them. One way you can definitely make extra money is on tax refunds. You can sign up for this federal project if you are interested, and rather than using the annual refund to go on holidays and vacations, you use it towards student loan clearance since you will have many years and a ton of opportunities to go on vacations.
4. Refinancing
Loan consolidation can have a positive impact on your student loan repayment plan, but there are risks involved too. Refinancing implies that you take out a lower interest and shorter-term loan and use the proceeds to pay off your student loans. To minimize the mistake of landing the wrong lender make sure to check out loanadvisor.sg to get the ideal student loans for you. Analysts say it can save you thousands – provided, the lender does not occasionally do hard pulls on your credit history as this negatively affects your score.
You are not a government beneficiary for the PSLF and grace periods. These benefits from the government assure you of a flexible payment option to cushion you from financial shock. If you refinance, then you automatically lose these benefits. Therefore, your hard assignment would be to determine the benefits of refinancing against its downsides before you put in an application for the refinance.
5. Paying extra annually
Financial experts’ advice for new graduates is always to consider paying a little extra coin towards their loan repayments as often as possible. According to them, this arrangement has a significant impact on the ultimate period it will take to complete the loan. Furthermore, extra monthly payment cuts almost a year off the loan period. So the higher the amount you save towards this, the more you can alleviate the situation, and the faster your loan balances would be a thing of the past. Therefore, it goes without saying that, the lesser the loan period, the lesser are the interests chargeable and hence the more savings you make on it.
6. Inquire about work programs that help in student loan repayment
Companies have increasingly been realizing how important student loans are to the young employees and how much of an impact they have on the work and responsibilities of the employees. Therefore, some have set programs that help the employee to pay up student loans by offering money say $10,000 towards the project for 5 years. So, before taking that job, inquire about the availability of such offers and the conditions involved.
The Bottom Line
You are in control of your debts, and make sure it remains that way. You should not allow loans to get you to a position where they control every spending decision you make. And, the faster you clear these loans, the better it gets for you. Since you are just a graduate with fewer responsibilities that your parents have, you can make a decision to solve this loan puzzle as early as you possibly can so that you can start saving up for your future and, ultimately, retirement. You can always come up with your own innovative ways to clear loan balances, but following the above directives and options leave you at a better place than you were initially.
