I Can Pay Off My Debt Early, Should I Do It?

by Dual Income No Kids on July 8, 2009 · 0 comments

Yes! It’s good to pay off your debts early!

If you do have extra money and want to pay down debt, the thing to do is be sure that the extra funds go directly to the principal of the loan obligation. Sometimes loan companies will try to be tricky and apply your payments in advance towards your monthly fees. For example, back in 2003 I sent my student loan lender $2,000. Instead of applying it to the principle, the funds were added to my monthly payments. The company instead said I didn’t have to make payments for a year. This is obviously a problem because when companies do this, you don’t get out of debt any faster.

So, the way around this is to contact your lender and be sure to understand how they apply extra payments. For example, you may have write on your check that the funds should be applied to the principle. Just double-checking can save you a lot of money and allow you to get out of debt faster and start building some wealth!

As a final caveat, when paying off your debt early, you need to sure you aren’t sacrificing your savings. Unemployment is really high right now. This means you’ll need a healthy emergency fund. In addition you need to be sure that you have enough money to pay your current bills, so if you aren’t that hot at budgeting, consider leaving a little extra in your savings.


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