We currently have a little over $30,000 in student loans and a mortgage that sits at around $110,000 to pay for which we are working on eliminating. We really want my student loans gone by April of 2013 at the LATEST. This is a big task to accomplish, but we feel that it can be done with a lot of effort.
There are many reasons why we want my student loans gone as quickly as possibly. While my minimum payments are only around $300 (I’ve heard of much scarier amount from different people, such as $1,500 minimum monthly payments), my interest rates on most of these loans range from 5.8% to 6.8%.
That’s such a high interest rate to me, and I can only think about how much in interest that I’m paying EACH DAY on these loans, and it all adds up so quickly.
The luxury of not having student loans no longer and not having them drag me down is a big plus and positive. We also want to buy a new house in 2014, and having a little less in debt would be a great thing, especially since it’ll most likely lower our interest rate on our future house. We are really working on our credit score and eliminating debt so that we can have the best possible credit score for when we are ready to buy our next house.
Also, having less in debt and not being tied down to my student loans is also good because it’ll free up our cash flow. If something were to happen which would decrease our monthly income, then I would prefer to not have to worry about how I’ll pay for my student loans each month.
Here’s what you can do to eliminate your debt quickly:
1. Make extra money.
This is the main thing that we are working on. Our goal is to make around $2,500 extra each month. Extra money is always nice because applying it to debt is easy and is not like you will miss that money as much as if you were struggling to pay your bills.
There are many things you can do to make extra money in order to pay off your debt faster. You can: get a part-time job at a retail store, become a freelance writer, walk dogs, babysit, tutor, among many other possibilities.
2. Cut your expenses.
We’ve already cut our expenses as much as we already would like to, so that is why we are working on increasing our income as much as we can. However, if you are really wanting to pay off your debt quickly, then you should be trying to cut your expenses as much you can. Try cutting things out that you don’t positively need, such as lattes, clothes, extra snacks, etc.
Also, call up the companies which you do business with and ask if they can lower your bills at least by a little bit. Usually they will say yes. Every little dollar counts, so don’t think you are better than one dollar!
3. Pay more than the minimum on your debt.
Paying only the minimum on your debt is definitely better than not paying at all, but paying more is WAY better. You can eliminate your debt much faster because you will be paying less in interest. Interest continues to build if you only pay the minimum payment, which surprisingly is something that a lot of people do not know.
4. Move money around.
I’m not saying everyone should do this, but we have decided to take some money out of our $15,000 emergency fund and we plan on applying a large amount of this towards my student loans. We’ve never touched the money before, so hopefully nothing happens in the mean time while we are trying to build it back up.
We believe that paying off my student loans (in which some are at a high 6.8%) is much more worthwhile to us right now instead of having money sitting idle in our emergency fund. Not everyone should do this though. If you are expecting future house repairs, have an unstable job, or anything else in which you might have to use your emergency fund soon, then moving money around might not be the greatest idea.