Get your student loan paid off faster by knowing how loans work and by using these simple tricks:
In order to make money (which is, after the purpose for being in business), lenders charge interest on the amount you borrow, called the principal. The principal plus the interest is the total amount of the loan. The longer you have the principal on the books, the more interest you pay, so you are on a merry-go-round for quite some time.
If you only make interest payments, which is usually what they call the “minimum payment”, you will be on the merry go round for a very long time, and the interest just accrues on top of itself. Better to chip away at the chunk from the beginning. So here’s how:
Your normal job
When you start paying back the loan, pay back the amount (at a minimum) they are billing you for, then add as much as you can on top of that and mark that amount “apply to principal” as a notation on your check or electronic note. Amortization is a tricky business, and there are loan calculators on the net that will help you figure out how much you can pay in order to cut the time in half, if that’s your goal.
If your normal job doesn’t yet pay you enough to put more towards your student loan, then get a second job and put every penny of that income toward your loan. Put Nana’s birthday check or your parents financial gifts toward that debt. Do everything you can to get that student loan paid down quickly because it’s the worst kind of loan that you can have.
Student loans are not forgivable; if you run into trouble and have to declare bankruptcy or do some other kind of reorganization it stays on the books; there is no way to get around it, so get it off your debt line as quickly as you can. Set up an automatic pay program from your bank account to make the payment on time; the additional late penalties are a killer, and that amount is added to the debt, increasing the amount of interest owed (it compounds, so you’re paying interest on top of interest).
In fact, if you can, add another amount (as little as $20 or as much as you can) to go toward the principal on a different day every month. It will make a huge difference at the end of your student loan. Keep chipping away, as fast as you can. About halfway through the loan the weight of your payment shifts; your payment applies more towards the principal than the interest, and you can really start making some headway, but you have to make a concerted effort to accelerate that process.
Make a concerted effort; all tips earned go toward the principal of your loan, babysitting money, ticket sales, whatever you’re doing extra on top of your new nine to five job, make a segment of that income (or all of it, if you can) purposely earned to pay down your student loan fast. You’ll be surprised how quickly you can get it done, and how much money you’ll save if you do.