I paid off another student loan! One more to go. Let me share a few things I’ve learned, maybe it will help you.
Read your statement. I got my loans through Sallie Mae. It has all the information about your loan, interest rates, monthly payments, automatic withdrawal, etc. Read it! Find out how many loans you have, what are the interest rates on each, when are the due dates, etc.
Research. Find out if you can consolidate your loans-I had 3 different loans and all three had different amounts and different interest rates. There are requirements for lowering interest rates or consolidating your loans. Find out if you qualify!
Do the math. Sallie Mae conveniently worked out a payment plan to my demise. If I had paid less than $100 every month for the next 10 years, my three loans would have been paid off. Of course, they didn’t mention how much in interest I would be paying. If I tripled the amount every month for each loan I would have paid off the loan in 3 years with more of my payments being applied to the principal rather than the interest.
Pay extra. It doesn’t hurt to go on spending fasts every now and then to apply the money “saved” to your loan. You’ll feel better about yourself.
Pay attention. If you’re planning to pay extra I strongly advise you to pay 2-3 days right after you paid your monthly payment. In that way, the extra payment will be applied directly to your principal. Pay attention. Check your loans several times a month to monitor when the interest kicks in and starts accruing.
What’s your interest rate. I had three different loans. I had three different interest rates. Two were fixed rates and one was a variable rate. Read about the variable rate. What causes it to fluctuate, how to steer away from fluctuating rates, etc. Always pay off the highest interest rate first.
Use your savings. I don’t make that much money. My yield on my savings account does not exceed my interest rate on my student loans. If you’re able to pay off a good bit of your loan with your savings DO IT! Chances are you don’t have a savings account yielding 5-6% to cover for the interest accruing on your student loan.
Make extra payments. It doesn’t hurt to make extra payments. That kicks back your due date for your monthly payments. It doesn’t mean if you made two payments in November you don’t need to pay in December. Pay in December! Only use up that extra month if you’re in an unforseen financial bind.
I enrolled in automatic withdrawal for each loan. I specifically made extra payments to the loan with the highest interest rate. I went on spending fasts-no eating out, no clothes, no buying anything-all that extra money went to the loan with the highest interest rate.
If you have any further questions-ask away. I hope I can help and hopefully these tips will work for you!