There’s no magic formula to pay off student debt, but there are several strategies you can use to save time, money and keep you motivated. These strategies paired with refinancing are a smart approach to pay off debt faster.
A strategy popular in the mortgage industry, bi-monthly payments cut down on your interest costs by applying your payment to more of the principal balance. Student loan interest accrues daily, so paying half of your monthly payment one week and the rest two weeks later helps to lower what you pay in interest. Remember, there are no prepayment penalties with Purefy, so you can pay early without consequences.
Putting your monthly payments on auto-pay doesn’t technically save you money, but it could still keep you from forgetting a payment. Automating your finances is a simple way to ensure you don’t miss a payment, which could cost you in late fees. Auto-pay can also make paying loans less painful — if you never see that money, you don’t miss it as much!
Some borrowers who refinance don’t include all of their loans. If that’s the case for you, focus on paying off loans with the highest interest rate first. You save money on interest costs by prioritizing your high interest rate loan while still making the minimum monthly payment on your other loans. Remember, refinancing can lower your rate on federal and private loans and get everything on one easy monthly payment and a more favorable term.
If you have a small loan with a low interest rate that you don’t wish to refinance, see if you can focus on paying that loan off first by aggressively putting extra cash toward the balance. Having one loan completely gone — even a small one — is a great way to stay motivated and get out of debt. Once you pay off a smaller loan, take that monthly payment and apply it to the next balance.
It’s important to remember that these repayments are strategies, so you’ll still need to make monthly payments on your other loans and just focus any excess cash on the method you choose.
Having a strategy isn’t just beneficial to your wallet — it also helps you feel in control of your debt. Personal finance is about a strategy, or combination of strategies, that works for you.