The longer you stay in debt, the more expensive that debt becomes. While taking out a student loan isn’t a terrible idea (let's assume it’s the only option), it’s important that you pay off that debt as quickly as possible to prevent yourself from going further into the red. Here are a few tips to help you.
The best place to start is to calculate exactly how much you owe. Your monthly instalments are not a true reflection of how much your loan will cost you over its lifespan. Nor are they an indication of the size of future repayments. Get hold of the paperwork for your student loan and look at the numbers carefully. How long do you have to pay it back? How much are you actually paying for the loan? Can you save money by paying it off sooner? If you can’t make head or tail of it, contact the credit provider for clarity.
Once you understand what your student loan is actually costing you, make a plan to pay more than the minimum monthly instalment. If you can increase this amount, you will pay off your loan sooner, and save yourself from having to pay all that extra accumulated interest.
If it’s difficult to pay more than the minimum instalment, do what you can until you get a raise or increase your income. When you do get a pay increase, instead of upping your lifestyle expenses, contact your credit provider and up your monthly payments – again, the sooner you can get out of debt, the better.
With a little bit of patience and some creativity, you’ll find that there are many areas in your life where you can cut costs and increase your savings. And this refers to more than reining in on the number of ready-made lunches you buy every week. You can save on grocery shopping by planning your meals around items that were on special, and save on your utility bills by cutting down on how much water and electricity you use. All of these little savings have a way of adding up. Instead of paying high bills, you could use these savings to get out of your student loan debt sooner.
If you don’t have a budget yet, now is a good time to start one. Work out all of your monthly expenses (student loan, rent, internet, electricity, groceries, etc.) and then deduct this from your salary. This will help you to see what you are spending, where you are spending it, and where there are areas where you can cut down on costs. It’ll also give you a clearer idea of what you are left with at the end of each month, which helps you to determine what extra amount you could add to your student loan repayments.
Budgeting properly and diligently sticking to it will stand you in good stead for the future. You’ll find that it soon becomes a habit, which is why it’s a great idea to start now. One thing to keep in mind while you’re budgeting is that to get out of debt quickly, you’ll have to make some hard decisions and some compromises when it comes to things you want – until you can truly afford them. If you would like to learn more about budgeting, check out these budgeting tips.
One way to pay off your student loan quickly is to find a source of extra income to help alleviate the financial strain of paying off debt. Can you possibly make a little extra writing? Is your skill set something you could offer in a freelance capacity? Are you perhaps a phenomenal cook who could make some goods to sell at the local Saturday market? Or how about tutoring or au pairing? Do whatever you can to bring in some extra work and income.
The last thing you want to do when you are paying off debt is get into more debt. That said, this is still where a lot of people find themselves - deeper in the red. If you decide to get a credit card, use it wisely and make sure to pay it off every month. It’s also a good idea, if at all possible, to start an emergency fund while you’re paying off your debt. That way, you won't have to rely on a loan for an unforeseen emergency.
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