Student loans seem to be part of the average millennial’s life. Unfortunately, they can significantly hinder one’s ability to put a down payment on a house, purchase a car, or even just live comfortably. Try as we may, saving up little scraps here and there for our student loans oftentimes isn't enough. So, how do you realistically save enough money to get rid of those pesky loans? These small tips can make a big difference in your life.
Understand Your Debt
Before you make those payments, you need to understand what you owe. Look into the interest rates, how much time you actually have before repayment, and what you can afford. Play around with different repayment scenarios with calculators or budgeting. Based on how much you make and the interest rates, you can plan out which plan is best.
Make Necessary Cutbacks
Speaking of budgeting, it’s likely necessary to help you pay off those loans. You don’t need to go out of your way to never enjoy anything, but you need to be smart about repayment. Go through your monthly purchases and see where you can make appropriate cuts. It may suck to give up a few of those luxuries, but it’ll be worth it when you’re debt-free years ahead of schedule.
A good way to figure out your financial situation is to start writing down your purchases. You can also keep your receipts. Having physical copies of your spending opens your eyes to where your money goes. In an age of plastic, it’s easy to tap into our savings without thinking. But when you’re planning to dig out of debt, you need to be more conscious.
Don’t Wait to Make Payments
A common mistake students make is waiting to make payments. Recent graduates tend to wait until the last minute to make any payments, but you shouldn’t. If you can afford to make payments immediately, do so. There’s no real penalty to you contributing early. Plus, interest rates accumulate during the grace period, so it’s best to get ahead. Paying right away gets you out of debt earlier and gives you peace of mind.
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Add a Little Extra
It may sound like a good idea to make minimum payments but consider otherwise. You may be paying less in the short term, but in the long run, you may be paying more. Interest rates can skyrocket when you make minimum payments, actually making you pay more. Not to mention, when you pay an extra amount every month, you’ll get out of debt much faster. Depending on how much you contribute, you could shorten your repayment period by several years.
This is why it’s a good idea to look into how much you owe and the interest rates. It’s also important to track your spending. If you cut corners, you may discover that you have more to add to your loans than you thought. Monitor your finances and contribute a little more each month if you can. You’ll undoubtedly be surprised at how quickly your debt decreases.
The Bottom Line
Getting yourself out of debt is hard, but it’s not impossible. It also doesn’t need to be a huge stress on your life or bank account. Sit down and go through what you owe. From there, work out which repayment plan is best for you based on your finances and spending. It may be hard, but monitor your spending so you can contribute more than the minimum amount due. The more you contribute, the faster your debt will deplete and the sooner you can get back to normal.