How to pay off a loan early?

Pay off loan before the deadline can bring many benefits and contribute to the financial health of your personal finances. 

With this action, you can save money by reducing the interest rate and other fees involved in this operating model.

Additionally, you get rid of debt that could compromise your budget and financial planning.

However, is it possible to pay off a loan before its full repayment date? How can I do this? What are the advantages? 

Keep reading and find out! 

How does a loan term work? 

The term of a loan is the amount of time you have to pay back the amount you borrowed, plus interest and fees. 

This period may vary depending on the type of loan, the amount, the interest rate and your income. 

Generally, the longer the term, the higher the interest and fees. 

Therefore, it is important to choose a term that suits your payment capacity and your objective. 

Some types of loans offer very long repayment terms, such as payroll loans.

Others offer a shorter term, which is usually the case with unsecured loans.

How to pay off a loan early?

To pay off the loan before the deadline, you need to have discipline and financial organization. 

If you're already organizing your finances for this, see what the next steps are. 

1. Make a financial plan

Initially, financial planning is very important for those who do not give up on achieving their goals.

In short, it's planning and organizing on paper what your plans are and the goals you want to achieve.

First of all, you need to know what your financial situation is like right now.

Try to make a map of all your expenses present and future.

Then, it's time to organize it on paper, make a spreadsheet on your cell phone or computer.

Then, in your spreadsheet, create a type of expense x amount to be paid in front of the expense in question.

This is to put them in order of payment, identify the most urgent ones and which ones can be negotiated.

Now it's time to put yours earnings in the context of expenses, salaries, retirement, income from self-employment, among others.

Furthermore, it is essential to make a family reunion, after all they are part of the plan, so you can find out how to pay off the loan before the deadline.

Search cut costs, like going to the coffee shop, snack bar, buying things just because they're on sale and then not even using them, this will make things a lot easier.

Decide together with your family, eat cheaper, eating at home, opting for outings in public places like parks and zoos, your expenses will certainly decrease.

This way, you avoid going to places where you might be tempted to spend money on something you don't need.

Finally, have an emergency fund for unexpected situations, so you're not at the mercy of interest rates from financial institutions.

2. Negotiate with the creditor

The next step is eliminate debts with high interest rates, try to negotiate your debts to pay off those with the highest interest rates.

Try to show the creditor that you are available and determined to resolve the situation, because it is best for both parties.

Therefore, make a negotiation proposal and be completely transparent, laying out your entire financial situation on the table.

3. How to pay off your loan early Use your 13th salary, FGTS or income tax refund 

Other ways that people normally use to pay off debts are benefits guaranteed by law, such as the 13th salary, FGTS and income tax refund.

For example, your company may be able to advance part of your 13th salary.

However, as mentioned, use only a portion, and keep in mind that you will not be able to count on the amount that has already been withdrawn.

In this sense, you can also use emergency or extraordinary withdrawals, as well as the anniversary withdrawal of your FGTS.

Remembering that this must be done in an organized and thoughtful way, keeping in mind that the intention is to help solve a problem and not create another.

If you are entitled to an income tax refund, you can now take advantage of the opportunity to help pay off the loan before the deadline.

4. Earn extra income

In this situation, it is also very important that you develop alternatives to earn some extra money.

Use your imagination and talents to create something profitable that won't generate more costs and lead to a bigger problem.

Additionally, another interesting idea is to make a list of objects and belongings that you no longer use.

So, you can even hold a bazaar and earn some extra money. Talk to your family and they will certainly be able to help by contributing.

Even consider getting rid of those electronic devices that are sitting around the house and are no longer used, but could make you some money.

What are the advantages of paying off a loan early? 

As already mentioned, pay off the loan before the deadline brings many advantages, such as savings on fees and taxes. 

See below the advantages this practice brings to your financial health.

1. You will save money

Think that the money you would have paid in endless installments will now be available to you to invest or use in another way.

Furthermore, when we pay off a loan early, we can get good discounts, which can make the debt more economical.

2. Have more peace of mind and financial freedom

Just thinking that you won't have that debt that consumes your mind and often keeps you awake at night is already gratifying.

For example, the installments were somehow limiting your financial life and preventing you from taking new steps and carrying out other plans.

This way, you can now put your head on the pillow and sleep peacefully.

Conclusion

Remember, it's never too late to start, maybe the situation is so difficult that you think it's not worth trying anymore.

But, it is possible. pay off the loan before the deadline, just decide, plan and put it into practice and you will succeed.

So, seek reliable help and advice for your planning and put all the tips into practice. Cheers!