Studying abroad in an IVY- league college is almost every millennial’s dream. But do you know how much money goes into it? It’s like an enormous amount that not every household can afford. Eventually, we go for student loans option, and that is a debt burden once you complete your education. Many of today’s graduates face the exhausting task of paying off student loans within a reasonable time-frame. So, to get rid of it ASAP, you need to come up with a systematic plan.
One of the best ways to pay off your student loan debt in a short-term period is to turn the windfalls into extra payments. Yes, ‘just paying off more’ isn’t quite realistic advice for most people. But imagine even a few additional payments can have a significant impact on the student loan balance. By reducing the principal balance, you can minimize the loan duration and the interest accrued on it.
Now you must be wondering how to pay that extra amount when you don’t have a high paying job. Well, the simplest way is to put aside a significant amount in your savings account while you’re studying or maybe take a part-time job during your studies. It might be painful to put something fun like cash windfall towards your student loan debt, but honestly, the results can be dramatic.
You can pay a small amount of money every month which will help you to pay off your loan faster than expected as well as save on interest.
Now, how do you find the idea of paying the extra amount because you’ll have one less debt you owe. The money you further make can be invested and applied to owning a house, saving for retirement or your child’s education.
Another way you could opt for to pay off your loan faster is to divide the monthly payments into two instalments within a month. This would sound like a burden, but it’s one of the best ways to get rid of the loan as soon as possible.
It’s such a relief. Isn’t it? For this, you need to have some income coming to you and getting that saved every month rather than spending it unnecessarily.
It is like you set an end date which makes you determined to pay it within that time-frame. It acts as a deadline that you must meet anyhow.
Say for example; you have a college debt of Rs.25 lakhs. Annually, you’re making Rs.10 lakh in salaries. By establishing a budget with a goal of 3-years completion, you can make the necessary adjustments to your daily spending to meet that end goal.
In the end, budgeting for a 3-to-5 year-end date could majorly reduce the amount of time spent on paying off the student loan.
This would be an effective strategy to achieve a new term length or lower the interest rate or maybe both. It involves taking out a new loan and using the funds to pay off the old loan.
For instance, you might want to refinance a 10-year student loan to a 7-year term.
It would result in higher monthly payments, but this could help you pay off the loan faster and save money on interest.
And if you manage to refinance to a lower interest rate as well, that would be an additional benefit, and more of your money can go towards paying down the balance.
If you’re wondering how to get approved for student loan refinance, banks or lenders might evaluate your credit score and profile, income, debt-to-income ratio and monthly cash flow ratio among other factors.
So, if you don’t wish to carry your student loan burden for more extended periods, then by all means, pay them off as fast as you can.
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