College education comes at a huge cost.
If you cannot afford to bear the costs of attending college, then you have to resort to other alternatives for funding, such as federal and private student loans.
However, one of the major factors to consider about student loans is the interest rate and the total amount of debt.
So, you must employ all the strategies available to reduce your total loan cost.
There are several ways you can reduce your total loan cost as a student. Read on to find out 10 tips that will enable you to achieve this.
Tips To Reduce The Overall Cost Of Your Loans And Get Out Of Debt Fast
If you have to get a loan to pay for your education, you must ensure that the debt is as reasonably priced as possible.
However, here are ten tips that will enable you to pay the lowest amount possible:
1. Shop around and compare offers
You can assess the rates that several creditors will offer you by completing the online application, which does not even have an impact on your credit score.
You can utilize a loan marketplace to assess several offers at the same time with just one application.
Making time to assess the variety of options available to you is a great idea.
It will enable you to pick the best possible option available to you.
2. Pay on time
If you can adjust your financial plan to enable you to complete the payments early, just do it.
As you continue to make payments towards reducing the loan, your balance will drastically reduce, and you will also reduce the overall interest that you have to pay.
A good number of creditors won’t collect any money from you for clearing your loan ahead of schedule, and some will even reduce your term length if you have been making regular payments.
3. Complete more than the minimum payment each month
Completing the minimum payment every single month possibly would not enhance your chances of clearing the entire amount you owe due to the fact that a good portion of your money will be used to settle the interest first, which could even get worse if the loan was acquired at a high-interest rate.
On the other hand, paying far more than the minimum payment each month will significantly reduce your debt and the interest you are required to pay.
Nevertheless, if you must choose between making the minimum payment and not making any payment, just go ahead and pay the minimum amount.
This will prevent you from accumulating more debt.
4. Look at a variable-rate loan
Variable rates are not always stable over the course of the life of a loan, and they normally start lower than fixed-rate loans.
Although you run the risk of a loan rate increase over the life of the loan, a rate drop will do you the world of good.
Getting your loan paid off quickly may go against the locked-in rate part of a fixed loan since you will start out with a lower rate.
5. Refinance your loan
If you are now in a comfortable financial position since you first obtained the loan, you can look at refinancing to leverage the outstanding terms available to you.
This could include a superior rate, better customer service, and a separate term length.
Nevertheless, it is important that you are cautious before you refinance federal student loans because you could miss out on other student loans that have very little or no interest.
6. Put bonuses, tax refunds, and all the extra funds you have toward the debt
Although mobilizing all your extra funds towards clearing your debt may not excite you, injecting them into debt servicing will improve your chances of clearing the debt faster.
You may not be able to figure out how much extra money you will get in a month or year; however, if by any chance you happen to know, ensure that you add it to the budget that you intend to channel toward student loan servicing.
No matter how little the extra money is, it will go a long way toward doing wonders.
Moreover, don’t put all the money into debt servicing; also save a part of it so you can do something useful for yourself.
7. Register for automatic payments
Several creditors will give you a discount when you register for automatic payments.
Although a discount of just 0.5% or lower looks quite small, it can make a big difference in the long run.
Moreover, registering for automatic payments will make sure that you don’t fail to make a payment for the month, which can destroy your chances of collecting future loans.
8. Choose a short-term length
There are two term lengths that will be available to you when you want to get a loan: the shorter term length and the long term length.
However, choosing the short-term length is the best out of the two options because the monthly payments are large and the interest that you will pay will be smaller, reducing the entire loan cost.
9. Place more emphasis on federal student loan options
Federal student loan options are the best loans that you can get as a student.
They always have lower rates and superior security to the loans offered by private bodies.
In some countries, all your loan debt can be cancelled if you secure a government job and make the minimum monthly payment for 10 years.
This makes a lot more sense than agreeing to take a loan from a private body.
10. Never allow interest to capitalize on your loan
If you want to cut down the total loan cost, never allow interest to capitalize on the loan.
Capitalized interest is outstanding interest added onto your loan balance after spells of non-payment such as delays, leniency, and grace periods.
Capitalized interest will increase your complete loan balance, and you will eventually get to pay interest on a larger amount.
If you keep taking more time to pay a loan, you will end up paying more.
How To Increase Your Chances Of Landing Scholarships
Obtaining a scholarship, grant, or fellowship is one of the ways to reduce your total loan cost. You can increase your chances of landing scholarships by applying the tips below:
1. Get a head start
There is always a deadline for scholarship applications, and those received after that date will not be reviewed.
For this reason, you should hurry up and send your application before the scholarship board’s deadline.
2. Make sure you meet the criteria of the scholarship
Before you spend money and time on the application process, make sure you meet the scholarship’s eligibility requirements.
3. Get a certified copy of your transcript
To be eligible for a merit scholarship, you must have a copy of their transcript.
On the other hand, getting a signed transcript from the school’s registrar or counselor will make it more likely that your application will be accepted.
4. Obtain excellent recommendation letters
Letters of recommendation reveal a great deal.
Therefore, get letters of recommendation prepared by instructors or experienced teachers who understand you sufficiently to give adequate facts to convince the scholarship jury.
5. Produce a masterpiece of an essay
Any possibility you have of winning a scholarship hinges on how well-written and error-free your essay is. Make sure your essay is well-organized and free of typos before turning it in.
6. Create an engaging CV
Make a CV that stands out by showing your relevant experience and accomplishments, giving impressive statistics, emphasizing key points, making it easy to read, and listing your computer skills.
7. Get a high score on the SAT or ACT
You can increase your chances of being awarded a scholarship by scoring very well on the SAT or ACT.
Do your best on any standardized test to get a very high score that will catch the attention of any scholarship committee.
8. Don’t falsify any paperwork
If you’re trying to get a scholarship, don’t bother getting any fake documents because scholarship boards routinely do validation operations to make sure the documents candidates submit are real.
Frequently Asked Questions (FAQs) on How to Reduce Your Total Loan Cost
You can save money on your loan by refinancing, paying it off early, borrowing just the amount you need, finding a loan with a reduced interest rate, increasing your credit score, or any combination of these strategies.
The principal and the interest are the two key factors in the overall expenditure of borrowing money. The term “principal amount” refers to the initial sum lent or the outstanding balance. Interest is the extra money that you owe your lender on top of the principal.
Yes, it is possible to negotiate with the lender and have them pay for some of your closing costs when you borrow a loan.
Yes. You can avoid future interest costs on your personal loans if you pay them off promptly. Paying less interest on loans means extra savings in the bank.
Conclusion
A college education is expensive. If you cannot afford it, you will probably need a loan to actually fund your education.
Moreover, you can reduce the total loan cost by applying the tips discussed in this article.
To avoid having to borrow money for your education, look for fully-funded scholarships that cover the costs of your education.
Awesome one; I hope this article answers your question.
Editor’s Recommendations:
- Do Medical Students Get Paid? (FAQs, Online Money)
- How Does Venmo Make Money? (Payment, Charges, FAQs)
- How to Make Money as a Digital Artist (Salary, NFTs, FAQs)
- How Much Money is in an ATM? (Maximum, Loading, Limits)
- How do Radio Stations Make Money? (Step by Step, Promotion)
- How To Make Money With Your Smartphone In South Africa
- How Do Churches Make Money? (17+ Ways)
If you find this article good, please share it with a friend.
