Paying Loans – Tricks & Things Lenders Don't Tell You!

There is only one standing principle to follow when paying loans…DO!
How you pay them down is up to you, but I’ve found some really nifty tricks to help lower interest rates and make the process less painful...

1. Start paying while you are still in deferment. This is the only chance you get to pay down any interest that accrued and even pay down the principle while can only help in the long run! Some lenders will even reduce your interest rate because they see you intend on paying back the loan ASAP in a responsible fashion. This may not be an option for you, but remember to at least set up repayment plans while you are in deferment. At the very least you will be able to sleep better at night.

2. Always pay on time! The loop holes lenders use to increase your interest are endless. Always pay on time and if you can’t, call your lender before hand to find other solutions. Believe it or not, they actually want you to be able to pay. One missed payment could mean a hike in interest rates, which can add up to hundreds over time so you really can't afford to be late.

3. Try your best to include interest in your payments. There is no worse feeling in the world than paying a large monthly sum and knowing that next month it might get bigger. If the loan was large, than interest accrued (per month or year) might actually be more than a payment. Always try to include interest in your payments that way you’re not losing ground, but starting to make real progress on paying them off!

4. Try consolidating. If you have student loans through the government (Perkins or Family Loans) your consolidated rate might actually be worse, but if you have private loans there is a good chance consolidations can help lower payments and organize all your loans. Try finding a non-profit organization that offers consolidation for student loans and you will be in good hands. This has become harder to do with the credit crunch, but not impossible. The US government also offers student loan consolidation, but make sure you use their calculator to see if consolidation is right for you.

5. Set up an automated payment. This isn’t a great idea for those of you who don’t watch your bank account, but setting up an automated payment means you won’t ever forget/miss a payment and often lenders will lower your interest rate for setting them up.

6. Asking for deferments. If you become unemployed or something major happens in your life, some loans can be deferred. There are limits and guidelines for all deferments, but they are out there, so talk to your lender if you can’t make payments for some reason.

7. Save Money! Translated this means don’t spend! If you have loans this means you just bought something really expensive; whether it’s a diploma, a car, a house, or something much smaller recognize you just spent a lot of money. Now it’s time to cut back and save money until that item is paid off. This doesn’t mean ending your social life and becoming a miser. It does mean, stop putting on more debt or buying unnecessary items. Just remember the wise words of our beloved Benjamin Franklin..."A penny saved, is a penny earned!"

8. Track your payments. This sounds silly, but if you track of your payments made every month you will start to see the progress. Allow yourself to feel the accomplishment you are making and hopefully this will keep you motivated to continue paying down those loans. Some loans take years to pay off and staying motivated can be difficult, especially if circumstances in your life change.

9. Stay motivated. Even if you are nearing the end of your loan and it’s almost paid off, that doesn’t mean it’s time to go out and spend money. See your payments through to the end. Sometimes this means recruiting help. Tell a friend to question everything you buy and keep your spending/saving expectations realistic. Recruit friends and family to be your support team if you need extra help. There is no shame in asking for help and your friends may respect you more for asking for support.

10. Take time to enjoy what you have. It’s so easy to forget why we got the loan in the first place and how it bettered us. We need to take time to appreciate the things we have, however small or trivial as they may seem. This will help keep you motivated and remind you of the things that really hold meaning in your life.

From one borrower to another, good luck and happy repayment!!