How To Pay Your Loan Off Early During COVID-19

While many of us are in survival mode during the current pandemic, there is actually no better time to get ahead in our financial situation in order to set us up for financial wellness in the future. Particularly for young adults, the current situation has presented us with some unique opportunities we may have not had before.

Because of these unique opportunities, now is the time to begin working on paying off our loans and debts early so that we are one step closer to credit scores and savings accounts that we can use to buy our first home or buy that Tesla we have always wanted.

If you’re wondering about how to pay off your loans early during COVID-19 and what the benefit of doing so is, keep on reading.

How To Increase Your Loan Payments During A Pandemic

While the economy is most certainly sluggish, Americans actually have more in their savings accounts now than they did before the pandemic. If you’re one of the Americans who is letting their $1200 stimulus check sit in their savings account – don’t.

 

As long as you have income coming in – go ahead and use your stimulus check to pay off your loan. A $1200 payment will work wonders at decreasing the amount you will pay overtime in your car, for instance. The earlier and more you pay on a car loan, the less APR you will pay over time – helping you pay off your car even faster.

What Loans Should I Pay Off Early

Paying off your loan early is usually a good idea, but each type of loan has its own nuances. For instance, as we mentioned, paying off your car loan early will help you save money. You should pay more on your car payments as early as possible. If you end up in some financial trouble later on during the pandemic, you simply won’t have to pay for awhile, depending on how much you paid ahead of time. You have to pay that money either way – so doing larger amounts earlier is always a better idea.

However, there are some loans that you don’t want to pay off early. One example of this is mortgages. Many mortgages have prepayment penalties that will actually cause you to lose money. If you are unsure if you have a prepayment penalty, be sure to look at your mortgage or talk to your lender before you begin making extra payments.

There are no prepayment penalties with student loans, however, and those often have some of the worst fees associated with them. If you still have student loans, do be sure to put your stimulus checks towards getting them paid off as quickly as possible.

How To Make Larger Loan Payments During COVID-19

There are plenty of opportunities to make extra money in order to get out of debt during COVID-19. For instance, delivery drivers are needed now more than ever, and it’s easy to sign up and get on the road ASAP. There are also many freelance jobs available on sites like Upwork that may need your skillset. You can work your side-hustle flexibility and from the comfort of your own home.

Posted in: Personal Finance

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