So, with that debt hanging over your head, how can you escape the trap? Luckily, there are a couple of things you can do to help yourself, from equity to overpayments, and many are easy to pull off.
With a mortgage and bills to pay, it’s about time you banished your loans and started enjoying life a little more. Debt isn’t a good thing to be dealing with, so take a look at the following options and see if any apply to you!
Overpay each month
It may sound obvious to state, but it’s one of the best ways to quickly clear a student loan. However, there is more than one way to go about it.
Let’s say that you made your payment for January. In February, you’re usually paying off any interest that has built up since your last payment, and the rest will lower your overall debt. When you overpay, you can either opt for this extra money to reduce your next payment or lower your overall debt. So choose wisely! Even just paying off £15 extra each month can save you a load of hassle down the line. Consider giving up that bottle of wine, or some other luxuries you could live without.
Apply for an equity release
An equity release on your property will grant you a lump sum that you can use on anything. This can help you cut a large chunk out of your student loan, or maybe pay it off altogether. The amount you are granted will be determined by the value of your property, among other things, so enquire into how much you could be given. You could use an equity calculator, such as Which Equity Release, to get yourself a quote.
As is the case with any lump some, think carefully before you splash out on something. It might be more prudent to pay half into your university fees, and keep half for a rainy day.
Change the frequency of your payments
Most people will opt for paying off their loan monthly. It’s the standard way of doing things, and is generally what most people opt for. However, altering your frequency of payments can help you save a ton of cash and interest in the long run, so consider it.
For example, let’s say you pay £50 a month. Over the year, you’ll be paying £50 x 12 which equals £600 in total. Instead, paying £25 a fortnight, or £12.50 a week, would mean you paid £650 a year instead of £600. It’s not much difference from that £50 a month, but you’ll take an extra £50 a year off your debt.
Another higher example would be if you paid £150 a month. Instead, halve this and pay that amount fortnightly. It works out at £75 every two weeks, which is 26 x £75 = £1,950 a year. Paying £150 a month would only come to £1800.
In short, take a look at your payment frequency. A slight shift, even just to fortnightly, can see you pay hundreds of pounds more each year.
Make payments while you’re still in education
It can’t hurt to start paying off that loan as soon as you take it. The longer you wait, the more the interest will build up and the more you’ll end up paying in return. Starting to pay sooner will not only lower your overall balance, but will free this money up later on in life when you have kids and a mortgage to fund.
So, when you’re at university, think smartly. If you have a part-time job (and you should) put half that money into your debt and keep half for yourself. If you don’t need any of it, great.
Another way to go about this is to use the loan itself. If you find that you have a bit of money left over after each loan payment, use this money to start paying the loan off. This has multiple benefits besides actually reducing the amount you need to pay back.
For starters, in your next year of education, you will know that you can apply for a smaller loan and still be ok. If you had £100 left over from your last loan, apply for £100 less this year. This slashes your debt without you actually doing anything, so take it into consideration.
Ask for debt repayments as presents
And lastly, it never hurt to be a little cheeky. Instead of your mate buying you DVDs, games and books, ask for the cash value instead. We all need cash fast, and this can be pumped straight into your student debt, without you lifting a finger. Win/win.
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