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There are several key ways to clear your student loans quickly. In order to achieve this goal, you will need to:
- Make extra principal payments
- Take advantage of discounts
- Budget your money carefully
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Make Extra Principal Payments
It is impossible to clear any loans quickly if you don't pay more than the minimum amount due. For many student loans, the payment schedule is created to pay off loans over ten years. Some loans, especially if you have a large balance, are set so that it will take 25 years to pay them off. If this is the case, you will often end up paying more in interest than the amount of the original loan.
To pay off loans quickly, set a goal to pay much more than the minimum amount each month. Any extra money you can find in your budget should go toward repaying student loans. For some lenders, you will need to specify on the bank check that you want the payment to apply toward reducing the principal balance of the loan. If you do not, some lenders will apply the payments to the amount due. Write a note specifying that the extra payments should be applied to the principal balance when sending them to ensure they are credited properly.
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Take Advantage of Discounts
Most lenders offer interest rate discounts for certain behaviors. For example, you may be able to get your interest rate lowered slightly by setting up an automatic payment from your checking account. You may also be able to get a discount for making a series of on-time payments. Find out which incentives your lender offers and take advantage of as many of them as possible.
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Budget Your Money
Making extra principal payments is the key, but where does this money come from? The best way to pay off your student loans fast is to budget your money carefully to send in larger payments to reduce the principal. For example, if you have a lot of extra cash left over at the end of the month, then put this toward reducing your student loan balance.
Set up a budget at the beginning of each month to determine how much to pay toward debt, how much to save, and how much to spend. If you can, make the payments to student loans first, and make them automatically. This way you will not be tempted to spend the money on something frivolous once the extra funds enter your account since you will know the funds will be withdrawn for the student loan payment.
Continue living like a college student for a brief period of time after graduation in order to pay off student loans faster. Do not purchase a new car or get a fancy new apartment/house when you start earning paychecks, but instead put that money toward aggressively paying down your debt. It will all be worth it once you become debt free faster and will allow you to easier make larger purchases later on.
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For additional information, you can check out Five Methods to Reduce or Eliminate Student Loan Debt.