Creating a plan to pay off your loans right out of college is critical to significantly cutting down the time it takes to pay off loans and save you money.
That’s why we’ve created this infographic to help you learn the best way to pay off your student loans.
Find out which strategy is best for you. List your debts by principal balance and interest rate. You can use free tools like unbury.me to quickly see the difference between using the Avalanche method and the Snowball method.
If your loans have different interest rates, you may find that the best way to pay them off is by using the Avalanche method. This method entails putting any extra funds you have toward paying off the loans with the highest interest rates first. This way, you minimize unnecessary interest on your loans.
However, if your interest rates are about the same but you need some motivation to start paying off debt, the Snowball method may work best for you. Using this method, it’s gratifying to put extra money toward knocking out your smallest loans first, motivating you to tackle the rest.
Modify the methods to fit your needs, because at the end of the day, it’s not important which method you choose – you just need to find a strategy that works for your unique financial situation.
Depending on the amounts and interest rates of your loans, you may want to consider consolidating your debt into one low monthly payment. Whether or not consolidation is possible may also depend on what types of student loans you have – federal or private. Keep in mind, consolidation doesn’t always give you a lower interest rate. Learn more about whether consolidating your loans is right for you.
Some people decide to use a credit card or personal loan with a lower interest rate than their student loans to pay off big chunks of their debt. However, there are risks associated with this, including giving up access to benefits and repayment options offered by your student loan provider, as well as a potential impact on your credit due to the shift in credit mix.
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Whatever method you choose, paying additional money toward the principal debt on top of your minimum payment is where you start to see significant savings over time. So, create a budget to cut down on unnecessary spending and put the money you save to work.
Even if your income is low, there are side jobs you can get to earn extra money to put toward the principal of your debt in addition to your minimum monthly payment.
Consider odd jobs, taking part in paid focus groups, or babysitting. Every little bit helps!
Are you planning on taking out additional student loans? Use our free college calculators to determine if you’ll be able to pay back your debt on time or if there is a better option to pay for college.