Most of us don’t want to be owing money to anyone years down the line. Preferably, we’d all want our debts closed and sorted out as soon as possible. But we can’t always do so, since the reason we have debts in the first place is that we didn’t have the available funds to pay for such large amounts.
But that doesn’t mean we do nothing about reducing our spending and debt. We need a better hold on what exactly we’re doing. For example, we need to realise we’re paying off two amounts. As Fin24 notes:
“When you take out a bond, you are essentially paying off two loans every month – the first to repay the capital amount, and the second to pay off the interest charged over the loan period.”
Knowing this, they advise that you do not invest any extra income into other investments but to look at the bond as the main one. “By apportioning slightly more capital every month to help you to pay off your investment, you’ll end up saving significantly more than you could hope to earn by investing additional cash elsewhere.”
It is possible for some to pay off a home loan in, say, five years. This just means proper saving and smart managing of money. This could also mean proper reduction in saving on personal investments and purchases, so that you have more money every month; this means being more strict about your finances at least until you’ve paid off your loan.
You can also use tools to aid your finances, such as a bond repayment calculator, that allows you to have a better hold on your finances. By doing this we can have a proper focus in how we respond to debts that we owe.
Another way to decrease the length of time spent paying back a debt would be to try insert an extra portion of payment. As the Huffington Post notes: “If you don’t have the cash flow to commit to bi-weekly payments, you can achieve the same result by making one extra payment per year. Use money from a tax refund or bonus from work to help pay down your loan faster. Or you can divide your monthly payment by 12 and add this amount to all future payments.”
Using these methods, we can be smarter and have a firmer hold on our payments and thus, hopefully, make our lives better.