When it comes to paying back your personal loan, there are a few simple ways you may be able to pay it off sooner, which in turn can reduce the amount you repay overall.
If you have a personal loan with a variable interest rate you’re likely to have a little more flexibility when it comes to paying the debt down. But you can speed things up for a personal loan with a fixed interest rate too.
1. Make additional repayments
The amount of additional repayments you’re able to make on a personal loan will differ depending on your loan provider and the type of personal loan you’ve taken out. For a Fixed Rate Personal Loan and Secured Car Loan with CommBank, for example, you can make up to $1,000 in extra repayments a year, while on a Variable Rate Personal Loan you can make unlimited extra repayments.
Budgeting for extra repayments or using any extra money you come into (like a pay rise or tax refund) may also help you knock over the balance faster.
2. Increase your repayment amounts
If you have a personal loan with a variable interest rate, you may be able to alter your repayment amounts. If you’re working to a budget, see if you can create a little extra room each month to increase your repayments. The less you’re owing the less interest you’ll be charged, so every bit counts.
3. Increase your repayment frequency
You may also be able to alter how often you make repayments for your personal loan. For example, by making fortnightly rather than monthly repayments you’ll pay your loan off sooner. That’s because there are 26 fortnights in a year, meaning you’ll end up pay off an extra two weeks over the course of a year without really noticing a big difference compared to paying monthly.
4. Increase both repayment frequency and amount
If you’ve got a bit of spare room in your budget, and your personal loan allows it, you can increase both your repayment amount and frequency – helping you make an even bigger impact on your loan.
You may be able to redraw additional funds
Your personal loan may also give you the ability to redraw the additional repayments you’ve made should you need the funds. This gives you the best of both worlds – you can save on interest payments by making those additional repayments, but the funds will also still be available to draw on whenever you need it.