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How to save money on your personal loan — and pay off your debt faster

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How to save money on your personal loan — and
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If your personal loan has a high interest rate or a long repayment term, it may cost you more money than you think. Read these tips to save money and pay off your loan faster. (iStock)
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Nearly 43 million Americans have personal loan debt as of 2020, with an average balance of $16,458, according to a report from the credit bureau, Experian. Without a clear strategy for repaying that debt, many consumers will pay thousands in interest as they pay off their loans.

But there’s good news for personal loan borrowers: it may be possible to pay off your debt faster and save money over the course of your loan. There are a few strategies to achieve this, as detailed below:

  1. Refinance to a loan with a lower interest rate
  2. Work on improving your credit score
  3. See if you qualify for an APR discount
  4. Put cash windfalls on the balance sheet

Read on to learn more about saving money on a personal loan in the analysis below. If you choose to refinance your personal loan, you can: compare interest rates on Credible without affecting your credit score.

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1. Refinance to a loan with a lower interest rate

Whether you have just taken out a personal loan or are looking for a new loan with a lower interest rate, shopping pays off.

Personal loan rates vary widely — Credible’s partners offer rates between 2.49% and 35.99% APR. The rate you receive is based on a number of factors, including your creditworthiness as well as the loan amount and length.

If you already have a personal loan, you may qualify for a lower rate than what you are currently paying. Check out how monthly payment and total interest can change for a borrower with a 3-year, $15,000 personal loan if they get a new rate:

  • 12 April: $498 monthly payment, $2,936 in total interest
  • 10% APR: $484 monthly payment, $2,424 in total interest
  • 8% APR: $470 monthly payment, $1,922 in total interest

Look at your loan agreement to find your current rate and go to Credible to compare interest rates for personal loans free with multiple lenders in just 2 minutes. Once you have a good idea of ​​your estimated interest rate, use a personal loan payment calculator to determine your savings and see if it makes sense to take out a new personal loan to pay off your current loan debt.

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2. Work on Improving Your Credit Score

Since personal loans are unsecured and require no collateral, banks and lenders rely on your credit history to determine your probability of repayment of the loan, as well as the interest rates offered to you. So while you may be able to get a slightly lower interest rate just by shopping around, improving your credit score and then reapplying to get the lowest rate possible will save you even more money in the long run.

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Before shopping for a new personal loan, try to get a good credit score or better, defined by the FICO scoring model as a score of 670 or higher. But the best personal loan interest rates are reserved for borrowers with exceptional credit scores of 800 or higher.

You can get your free credit score and credit monitoring services on Credible.

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3. See if you qualify for an APR discount

Certain personal loan lenders offer a discount if you authorize automatic payouts from your bank account.

If you do not currently have automatic payouts set up, please contact your personal lender to see if you qualify for a discount.

HOW DO YOU GET A DEBT CONSOLIDATION LOAN WITH BAD CREDIT?

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4. Put money windfalls on the balance sheet

Cash windfalls, such as a tax refund or incentive check, can be used to help you pay off your personal loan balance faster and save you money on interest in the long run. Be sure to read your loan terms and conditions before doing so, as some personal lenders charge an early repayment penalty for paying off the loan early.

However, early repayment penalties are not very common and there are many lenders that offer free personal loans. You can visit Credible to compare personal loans, some of which charge no fees, such as a prepayment penalty.

SHOULD YOU GET A PERSONAL LOAN FOR DEBT CONSOLIDATION?

Do you have a financial question, but don’t know who to ask it? Email The Credible Money Expert at: [email protected] and your question can be answered by Credible in our Money Expert column.

The post How to save money on your personal loan — and pay off your debt faster appeared first on Notesradar.

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