After bagging a plum job and completing university what prevents a lot of professionals from spending the way they want and curtail their lifestyle to an extent? Well, the answer is quite obvious- it is the loan they took for paying the college and university fees. The student loan hangs like a burden on any young working professional for quite some time. The amount and tenure of the loan can vary from one instance to another. However, there is no denying the quicker you can pay off the loan, the better it is. Unless you can clear the loan- you cannot really make use of financial opportunities coming your way.
5 Tried And Tested Methods Using Which You Can Clear Student Loan Faster.
1. Treating Your Student Loan Like A Mortgage
It may sound a little unusual to some people, but it does work! The trick lies in making a larger chunk of payments than the minimum required per month. This helps reduce the loan principal quickly. Of course, for the period, you will have to live with some cutoffs. But if that leads to quicker loan clearance- is not that good! As the principal goes down faster, the interest rates tend to be lower. Eventually, you end up paying fewer amounts than what you would be paying had you stuck to the regular amount and schedule.
2. Setting Up A Special Fund For College Loans
You can also think of setting up a special fund for dissolving your student loan quicker. A fixed amount per month should be deposited into the fund from your salary. You may deposit the money into a special account from which you will not withdraw money. It is kind of a forced saving that eventually helps in expediting loan repayment. Do not use an existing savings account and you will be tempted to spend at times. It can be even better idea to link the account to plans that help your money grow over time- for short term though. When the money grows into a lump sum amount- use it to clear the loan. However, it will not be wise to link the account to stocks for it is quite volatile.
3. Utilizing Sudden Cash Gains
Sometimes, you can get a lump sum amount of money through expected ways. You may inherit a property and in some rare cases, win a lottery. Most young people feel tempted to spend the unexpected cash they get in travel, buying expensive products and so on. However, you would do better by using the money to clear your student loan.
4. Evading Repayment Schemes
A lot of people feel tempted by the federal student loan repayment schemes. This lets them repay the loan in easier installments. What they fail to see is that these schemes eventually delays the loan duration. In fact, financial experts advise against choosing Direct Loan Consolidation options. It can be detrimental when you want to clear the student loan. This basically blends in all your student loans into a single loan and you cannot settle the high interest loans faster.
5. Curtailing Your Expenses
This sounds pretty basic but it is absolutely essential when you want to clear the student loan faster. Unless you rein in your expenditure, it becomes hard to save extra and keep that money into a loan specific fund! It can be a tad tough initially, but remind yourself that you will not have to do this all through your life.
There are many ways to cut down on your monthly and annual expenditure, as it is.
You may give up using TV subscription and use internet to watch your favorite TV shows and stream them. Using a cable based unlimited and high speed internet connection is prudent in this context. A lot of TV content can be found online for free nowadays.
You may also move to an apartment where the rent is lower. Cutting down on habits like eating out on every weekend or often buying ready to eat packages in departmental store also help you save more. Using energy efficient lights to cut down on energy costs also makes sense in this regard.