Home and auto loan have become a normal part of life. With a car loan, you can get behind the wheel and enjoy driving your new car without fronting the entire cost. Home loans have also made it possible for many people to achieve their homeownership dream. However, loans with high interests can slow you down and make it harder for you to attain your financial goals.
If you are in debt and you do not know how you are going to get out of it, you are not alone. Finder.com estimates that Americans had racked up a total of $ 568.6 billion in auto loans in 2017. If you are looking to pay your home or auto loan you can follow these 4 steps to pay off your loan and get out of debt.
1. Know What You Owe
The first step to paying off your loan is by knowing how much you owe and how long it will take you to pay off the loans. A good way to do this is by using the simple loan payoff calculator to understand your financial situation. The loan payoff calculator will help you determine the annual fees for each loan, the interest rates and the total amount owed. It will also help you decide if debt consolidation will work for you.
2. Create a Payment Plan
You will need to create a payment plan for your home or auto loan. You can decide to pay off the most expensive loan first and then move to the other one. When you prioritize loans that have higher interests, you will be able to pay your loans better and get out of debt quickly.
3. Draw Your Budget
Once you have a payment plan worked out, it is time to draw your budget. Your budget needs to be tight in order to limit your spending so that you can have enough money to pay your loans. A budget will also help you identify the areas where you can cut back and reduce your spending. You will actually be surprised at how much money you can spare once you have written your budget down.
4. Make an Extra Payment
Once you have drawn your budget and you realize that you have some little cash to spare, you can use it to make an extra payment and shave a few months off your auto or home loan. This will work well if you get annual bonuses from your employer or if you are entitled to a yearly tax refund. Before putting in extra cash, however, find out if your home or car financing allows you to make extra payments. You do not want to be penalized for interfering with the original plan of your loan.
Pay what you can afford and while at it, make sure that you don’t skip any payments. This is because when you skip a payment, you extend the loan term since the missed payments are pushed to the end of the loan.
These 4 simple steps will help you pay off your home or auto loan and have more money in your pocket. Remember to also track your progress and be in the know about all upcoming payments.