Pay Down Your Debt Faster By Making Extra Payments

by Pam on June 1, 2010

Although it may not seem like much, making extra payments towards your mortgage and loans can save you a significant amount of money in the long run.  Even just a few extra dollars here and there is worth the effort to put towards your principal.

For example, if you take out a loan for $5000 at an interest of 6%, it would take you 5 years to pay it off if your monthly payment is $96.66.  However, by adding an extra $50 to your monthly payments, you could pay off the loan in full within 3 years 2 months.  If you added $100 extra to every monthly payment, you would pay off the loan in 2 years 4 months.

To make this more meaningful to you, check out this loan calculator and punch in your own loan or mortgage information to see the impact of increasing your regular payments or by adding a one-time lump sum.

My husband and I found that by putting extra money down on our mortgage, it has saved us hundreds of dollars on interest charges.  Our goal is to aggressively pay down our mortgage while at the same time not neglecting to save for our future retirement and other goals.

It feels good to pay down debt as it lifts a burden from your shoulders.  If you have difficulty using your money wisely, help yourself by putting any extra money away towards the principal of your loans so that you won’t be able to spend it on things you don’t need.

Just think, the sooner you are debt free, the sooner you will be able to use that excess cash flow for the things you really want to do but without the guilt or burden of knowing you will eventually have to find a way to pay for it.

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