Loans can help you buy something today that you would normally only be able to purchase after years of saving. There are several reasons to take out a loan, the most common is for a specific purpose like renovating your house or buying a new vehicle.
The Two Main Types of Loans
There are two main types of loans – secured and unsecured. The most well-known types of secured loans are mortgage and auto. However, homeowners can also leverage equity – their property’s current market value, less any balance owed – as the collateral that secures a loan or line of credit. Credit cards and personal lines of credit are unsecured loans. Many customers with available collateral may still choose unsecured loan options for speed and convenience.
Round Up Your Payments
If you are looking to potentially shave off months from your personal, home or auto loan and save on interest, round up your payments and pay a little extra towards your principal balance. Even adding $25 a month to your loan payment will help pay it off earlier, resulting in savings.
Make One Additional Payment Per Year
If you can, make one additional large payment annually. You may want to set aside money from tax refunds, bonuses, or a pay raise for a hefty lump-sum payment. Just remember to inform your lender that your extra payment should be applied to principal, not interest.
Consider Refinancing The Loan
If your credit score or financial situation has improved since taking out the loan, consider refinancing. You could find an earlier payoff date or a lower interest rate.
Loans can help add value to your life with a new car, updates and enhancements to your backyard, or a new home altogether. Before taking out a loan, ask yourself if this is a want or a need and remember, vacations and weddings are not true necessities, and each can be scaled back to better fit your budget.
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