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Best Strategies for Paying Off Four Different Loan Types

As a consumer, there are many different types of debts you can have – student loans, auto loans, mortgage loans, and credit card loans. Of these loans, some offer fixed payments, while others vary based on the changing interest rate and/or fees charged each month. Before you find yourself in over your head in debt, follow these simple strategies to pay off these types of loans.

1.  Paying Off Student Loans

Student loans can plague your finances for many years if you take advantage of the deferment period and then only make the minimum required payments. If you would prefer to see the end of those loan payments, start making more than the minimum payment. Due to the fact that minimum amount is a guaranteed requirement, anything extra will go directly to the principal. You can either send the amount you have leftover each month without strapping yourself for cash or you can figure out the actual payoff date and then determine how much extra you need to pay each month in order to move that date up to your desired date.

2.  Paying Off Auto Loans

Auto loans are typically a fixed payment loan, meaning you pay the same amount every month. If you want to pay your auto loan off early whether you want to sell your car to buy a new one or you just want to be car payment free, the easiest way to do it is to round your payments up to the nearest $100. For example, if your car loan payment is $237, rounding up to $300 every month can cut more than 12 months' worth of payments off of your schedule. If you cannot round up, consider making one extra payment per year or break your monthly payments into bimonthly payments, paying exactly half of the payment every 2 weeks, rather than once a month. This helps to cut down on the interest that you pay in the long run.

3.  Paying Off Mortgage Loans

Mortgage loans are usually the largest loans anyone holds and for that reason, one of the hardest to pay off. There are a few ways that you can get ahead of your payments and knock a few years off of that 30-year payment. The easiest way is to make an extra payment each year. You can do that by either making one lump sum payment at a specific time each year or making the equivalent of a full payment in equal installments added onto your monthly payments. For example, if your monthly payments are $1,500, you could add $125 to each monthly payment. This would knock a few years off of your loan, helping you to pay it off early.

4.  Paying Off Credit Cards

Credit card debt can be the most frustrating debt to carry because it keeps adding up. If you only make the minimum payments, it could feel like an eternity to get the debt paid down, let alone payed off. The best way to attack that debt is to pay off the smallest credit card first. This will help you see progress in your efforts. Once you get that credit card paid off, take the amount you paid to that card, plus the minimum you paid on the card you are trying to pay off next and start getting that balance paid off. You can then continue the strategy until all of your credit cards are paid off.

Getting out of debt can seem like a tunnel that leads to nowhere, but you will get there eventually. Put your eye on the prize and stay diligent with your efforts. Eventually, you will see the fruits of your labor and have money in the bank to save.