Paying off your loan ahead of schedule can save you hundreds or even thousands of dollars in interest. Here are several strategies to help you become debt-free faster:
1. Make Biweekly Payments
Instead of making one monthly payment, split it in half and pay every two weeks. This results in 26 half-payments or 13 full payments per year—one extra payment annually without feeling the pinch.
2. Round Up Your Payments
Round up your payment to the nearest $50 or $100. For example, if your payment is $187, pay $200 instead. The extra amount goes directly toward your principal.
3. Make One Extra Payment Each Year
Use tax refunds, bonuses, or other windfalls to make an additional payment. One extra payment per year can shorten a 30-year mortgage by several years.
4. Refinance to a Shorter Term
If interest rates have dropped or your credit improved, refinancing from a 30-year to a 15-year mortgage can save significant interest, though monthly payments will be higher.
5. Allocate Windfalls to Your Loan
Apply unexpected money (inheritance, gifts, bonuses) directly to your principal. Even small amounts can make a difference over time.
6. Use the Debt Avalanche Method
If you have multiple loans, pay minimums on all but the highest-interest loan, putting extra money toward that one. Once paid off, move to the next highest-rate loan.
Before making extra payments, verify with your lender that:
- There are no prepayment penalties
- Additional payments are applied to principal
- You don't need to specify that extra payments should go toward principal
Use our loan calculator to see how extra payments affect your payoff timeline and total interest paid. Small changes can lead to big savings!