BY ALEX LAWSON
A student loan can be a real millstone around your neck. The monthly payments can feel crippling, and you don’t want to get into a position where you aren’t paying it off at all – but watching the interest build instead. The best course of action is to take care of it quickly and get it paid off, so you don’t spend most of your working life worrying about it. But how can you achieve that? Here’s what to do.
Work more than full-time
It goes without saying that you will need some income coming in to pay off your loan. But what most students don’t realise is that just getting a job usually isn’t enough. Unless you’re going straight in to a Wall Street position or taking over a successful company, your salary as a new graduate won’t be high enough to start making an impact. What you need to do is start working as hard as possible, using your spare time to earn even more money. A great way to do this is to join the sharing economy. You could become an Uber driver on weekends and evenings, for example.
Don’t start spending
There can be some temptation to start spending a little more when you do get that income coming in. You might want to move to a larger home, start a gym membership, buy more expensive groceries, and so on. instead, it’s better to keep living on as small a budget as possible. Don’t go for luxuries, and if you feel the need to treat yourself, just make sure it only happens once in a very long while. Keep your subscriptions down unless they are genuinely going to save you money. Living this frugal lifestyle will allow you to save most of what you earn, and use it to pay the loan off.
Increase your payments
Rather than allowing yourself extra money that could sit in your bank account and form a temptation, get the money going directly to the loan company. Increase your payments and you’ll quickly start to pay off more and more. This is something you can do easily so that you don’t have to think about how and when to pay back more of the loan, but can just watch it happening. A great thing about this tip is that you can also calculate how long it will take you to pay the loan off – and compared to how long it would take at the standard payment rate, you’ll see you are going much quicker.
Watch out for fees
Some student loan companies will use tricks to ensure they always get more money out of you, whether through interest on the loan or through fees that are charged on early payments. Read the terms of your loan carefully and see what kind of fees can be incurred, and try to create a system that avoids as much of the extra charges as possible. If you are going to pay it all off in a lump sum, you may find that the fees become negligible compared to the interest that would have been charged over the monthly payments for a longer period of time, so it can still be worthwhile.
Working as much as possible, keeping yourself in a frugal lifestyle, and paying back as much as you can on a regular basis are the real keys to paying off your student loan early. If you follow these tips, there will be a big bonus waiting at the end – once the payments are done, you can live in a more luxurious way immediately!
Alex Lawson is a Financial Team Leader and a blogger, working together with other experts at Brighter Finance. Whenever not working on another project or helping customers with their financial issues, Alex may usually be found online, reading money-related blogs and sharing his tips with other experts.