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Cut your debt by paying extra

Jun 6, 2008
If you are willing to pay more now on your debts it will benefit you later on in life. Imagine owning your car after only three years instead of four. Imagine owning your home in twenty five years instead of thirty. It isn't that hard to come up with money for a couple of extra payments here and there. As a result you will pay more towards your principle balance.

When you first start to pay back on such a loan you will discover almost all of what you pay goes to interest. Your car loan may be for five years and your mortgage for thirty years. Do you know how much money you will pay for interest over the course of that time frame? If you don't then you really need to look at it because they figures will likely astonish you.

If you are serious about getting rid of the debt and slashing how much money you toss down the drain, make some extra payments. It can be as little as one extra payment each year in order to really make an impact. It can reduce the time it will take to pay off your home by a full five years. For your vehicle you can likely shave off at least six months. If you are able to make more than one extra payment per year it will cut down the time even more.

When you make extra payments, all of what you send in will go towards the principle that is due. None of it will be taken for the interest that makes the company money. That stands to reason then that they aren't going to be encouraging you to pay more money on your account any time soon. If you are excited about the possibilities this has then evaluate how you are going to get it done.

Almost all of us are guilty of blowing money during the month. A few dollars here and there really starts to add up. Take your monthly house payment and divide it by the twelve months. This figure is how much you need to save each month to pay at least one extra payment on your mortgage. Take a close look at your spending habits and you will likely find ways to save that money.

Take those extra paychecks and use them without thinking twice. Generally this will happen a few times per year if you get paid every two weeks. There will be calendar months where you get three checks instead of two. However, you will only have the normal bills so this should all be extra cash.

Some employers offer bonuses to their employees for various reasons. They can be small or quite significant. Use any such bonus money to pay towards your debts. It isn't money that is taken away from your regular paycheck. Don't be tempted to buy things with it when you have so much debt still in place. There will be plenty of time later on to buy what you want.

There are plenty of calculators online that will show you how those extra payments can affect your particular situation. This is a great way to motivate yourself when it comes to applying such funds towards your debts. It can be tempting to buy other things with the funds but if you stick to your goals it will be in your best interest.
About the Author
Robert Bain writes about how to loans for bad credit build corporate credit the smart way, and avoid the common cashback credit cards small business financing disasters.
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