Many of us have loans and they do cost a lot of money. It is a good idea to think carefully about them though and see whether there is a way that we can pay less for them. There are a few things that we might be able to try which could help us.
Switch to a Cheaper Lender
The first option to consider is whether it might be cheaper to switch to a cheaper lender. You will need to start by researching the different loans and their costs and think about whether you can find one that will be cheaper for you. There is a lot of competition in the area of loans and so it is probably likely that you will be able to find one, especially if it has been a while since you took out the loan. Make sure that you do not just look at the type of loan that you have. For example, if you have an overdraft, then it is likely that the interest rate will be very high. If you pay it off with a personal loan, then this could save you a lot of money as the interest rate is likely to be a lot lower.
However, do be careful if you do this. If you pay off an overdraft or credit card with a different type of loan, you will still have those options available to you for future borrowing. This means that you might be tempted to take start borrowing using those again while you are still repaying the loan that you took out to repay it. This could lead you towards being in even more debt and financial troubles so consider whether this might be a risk for you.
It is also good to make sure that you check how much the repayments on the loan will be. When switching loans, it is easy to just be driven by cost and interest rate, which is not surprising, but you also need to make sure that you will be able to afford those repayments. They may be higher than what you were paying before and if you miss any, then you will have additional charges which you will not want to have to pay.
Overpay the Loan
If you repay more than necessary for the loan then you could start to reduce the balance owed more quickly. This will be reflected in the interest that you are charged and you will start paying less. This can have a great knock on effect and you can find that the money you save in interest, you will be able to put against the loan and you can slowly whittle it down. This can mean that you will repay it sooner and therefore save money on it.
You will need to check that this will save you money though. There are some loans that have an early redemption charge, which means that if you want to repay it early they will charge you a fee. This may be quite small and well worth paying, but it could be quite expensive. It is well worth checking to see whether there is such a fee on the loan that you are considering overpaying and calculate whether it is worth paying the fee and repaying early or whether it will make it too expensive.
Of course, if you are paying more than is needed for the loan, then you will have to find this money from somewhere. It could mean that you will have to take on extra work to be able to afford to do this or that you will have to spend less elsewhere. It might not be much fun to do this and you will need to decide whether it is a sacrifice that you are willing to make.