Personal loan hacks your bank doesn’t want you to know about
So, you've found the right personal loan. Maybe it's helped you get that car you'd always wanted, maybe you took that holiday you'd been talking about, or maybe you'd consolidated debts from some of your existing loans. Whatever you took your loan out for, and whatever personal loan you're now paying down, these personal loan hacks can help you save. Whilst every effort has been made to ensure the accuracy of these calculations in this article, the results should be used as indication only.
Switch to fortnightly repayments
When you elect to make monthly repayments, you’ll be making 12 repayments each year. If you make fortnightly repayments, you’ll essentially be paying the same amount each month, but you’ll be making one additional repayment each year.
This is because there are 52 weeks in a year, meaning you’ll be making 26 fortnightly repayments – making monthly repayments would be equal to you making 24 fortnightly repayments.
The benefit of this method is that you won’t notice any difference in your ongoing repayments, but you’ll essentially be paying your loan off sooner and saving on interest.
On a $20,000 unsecured loan at 14% p.a. interest rate over 7 years your monthly repayments would be $374.80 with the total amount paid sitting at $31,483.22. If you were to make fortnightly payments of $187.40 you would save 11 months on repayments and only repay $29,832.26.
By switching to fortnightly you would save $1650.96
Round up your direct debits
An easy way to manage your repayments is through direct debits – you’ll never forget to make a repayment if it’s automatically deducted from your bank account. This is also an easy way to make extra repayments on your loan.
If your fortnightly repayments are $235, round it up to $250, or even $240 – whatever you can afford. Even that extra $5 every repayment is going to make a huge difference at the end of your loan term.
Refinance to a lower fee or lower rate loan
Refinancing your personal loan is possible, but it’s easy to for borrowers to get complacent and think switching loans or lenders is more difficult than the return they’ll receive. But, if you see a loan available for a better rate, it's worth doing some quick calculations to work out if refinancing your personal loan is worth it.
Remember to take into account any early repayment fees that you might be charged on your current loan, as well as any application fees or other additional fees that you might be charged on the new loan.
Refinance your personal loan to a balance transfer credit card
If you’re in the final stages of your loan term and don’t have far to go, you could consider transferring your personal loan debt to a balance transfer credit card. There are a few card providers who will let you balance transfer this type of debt, and offer you interest-free terms for as long as 24 months.
If you budget your repayments and are able to repay your debt within the terms of your new card, you can save considerable on interest repayments. The credit card you take on could give you an ongoing means of spending, as well, after you repay your debt.
Keep in mind that repayments you make to your card will be allocated to the debt being charged at the highest interest. So, if you make purchases on your card during the balance transfer period, repayments you make will go towards them before paying off your debt. This needs to be considered before making purchases on your card during this period.
What lenders will let you balance transfer a personal loan?
Budget to pay off your loan early
When you take on a personal loan you agree to certain loan terms, and if you repay your loan before the agreed terms it’s considered repaying your loan early. Some lenders may charge you fees for doing this, while others may let you repay your loan early for no penalties whatsoever.
If your lender is part of the latter, you could budget to make lump sum repayments and pay off your loan early. You could save yourself hundreds in interest charges depending on when you repay your loan.
Getting the lowest rate and the lowest fees isn't the only way to save on your personal loan. Use these hacks to reduce what you pay in interest and get in control of your personal loan debt earlier than you thought you could.