Life after college is riddled with uncertainty. From where to live to what job to take, it’s not always easy navigating the period after graduation.
One of the pressing questions many graduates face is: Should I pay off student loans early?
Upon entering the workforce, evaluating your financial situation on a consistent basis – including how to best manage your student loans – makes good sense. Whether you are hoping to buy a home, purchase a vehicle, or perhaps start a family, issues like debt and student loans are sure to come into the equation.
Once graduates secure steady, reliable employment, they will inevitably be earning more money and can then determine financial priorities. For many, financial priorities involve how to pay off student loans fast.
There are several reasons college graduates should consider ways to pay off student loans quick. Doing so can free up your income to be spent on other monthly bills, such as mortgages, car payments, or even that dream vacation. Many borrowers pay off student loans more quickly in order to put more money into their savings accounts each month. There are endless reasons to free up spending to plan for the future.
One way to do this is to determine the best ways to pay off your student loans more quickly in a way that makes sense for your financial situation.
How to Pay Off Student Loans Fast
You have options when it comes to paying off your student loans. Depending on your student loan payoff goals and personal finance needs, you may choose to refinance your student debt into a new loan through a private lender.
This is a smart choice for many borrowers who qualify to save money on their student loans, lower their monthly payment, or pay off their debt much faster than planned.
By refinancing college loan debt, you have the opportunity to secure a lower interest rate, resulting in savings over the long run. Refinancing also gives you the chance to select a shorter repayment period, leading you one step closer to becoming student debt free more quickly.
Why Pay Off Student Loans Early?
Borrowers choose to pay off their student loans early for different reasons. No one likes to carry debt, and carrying too much of it can bring upon feelings of stress and anxiety during times of financial trouble. From saving money on interest to paving the way for large purchases, there are many benefits to paying off loans early.
The Benefits of Paying Off Student Loans Early
Money savings
The faster you pay off your loan, the more money you will save on interest. In fact, paying your loans off early can save thousands of dollars on total interest accrued, which is reason enough for many borrowers to consider this option. Paying off loans early is a big incentive for those who are dealing with high interest rates.
Lower debt-to-income ratio
Paying off your student loans early will result in a lower debt-to-income (DTI) ratio. Why is this important? Lenders typically take DTI into account when determining how much to lend and under what terms. The lower your DTI, the more likely lenders are to consider you a reliable borrower.
More discretionary spending
Paying off student loans early leaves more room for other purchases. Whether you’ve been wanting to remodel your home or perhaps purchase a new vehicle, paying off student debt early makes it easier to afford the things you really want in life.
Ways to Pay off Student Loan Early
There is no one-size-fits-all approach to paying off loans early. The method that is best for you will depend on several factors including your own financial goals. However, there are generally three effective ways borrowers can pay off student loans faster.
Larger Payments
Making a bigger payment than your monthly minimum is one way to pay down student debt faster. How much larger the payment depends on how much you can afford. Whether you pay an additional $20 or $100 per month, consistently making larger payments than your minimum due will ensure you pay off your student loans more quickly.
Lump Payments
In order to save money on interest, many borrowers choose to pay off their loans through lump payments. Making lump payments will minimize debt faster, meaning the interest you owe will decrease. Lump payments can save considerable money throughout the course of your loan.
Student Loan Refinancing
Refinancing your student loans is another great answer to paying off debt more quickly. To refinance your student loans, you’ll need to shop around for the best offer and then apply for through the appropriate lender. From paying off debt faster to securing lower interest rates, refinancing student loans is a wise option for borrowers hoping to save money in the long run.
Are you ready to take charge of your financial future? Paying off your student debt faster is just one way to maintain a better handle of your finances. Use our Compare Rates tool to begin exploring your student loan refinancing options. By quickly and easily shopping around for the best rates, you’ll know you made the best possible decision for your financial health.
