How to pay off student loan debt faster
BIRMINGHAM, Ala. (WBRC) - A financial expert warned it’s important not to ignore student loan debt, as it could harm you in the future.
“If you have those extra dollars, this will be a great time to knock down the principal payment,” Reginald Smith, managing director of Sabre Finance, said.
Smith said with student loan payments paused due to the pandemic, making payments during the pause of any amount will chip away at the principal, decreasing how much you pay back in the long-run.
When the pause is lifted, Smith said you can still pay the debt off faster.
“When you’re making your payments monthly, it’s split,” Smith explained.
Usually, a larger portion of the payment goes to the interest and then a smaller portion to the principle.
Smith explained paying a little extra, even if it’s a small amount, helps.
“When you make an extra payment, it goes directly towards the principal. But you have to make sure that you tell them that you want it to be a principal only payment,” Smith explained.
Smith said it’s important not to neglect paying your loans on-time or setting up arrangements as they can hinder you in the future.
“People have said, ‘don’t pay off your student loans. It doesn’t matter’ but as a lender, we run into that frequently. One, if you’re trying to get an SBA loan with the small business administration, that’s the same entity, meaning that they are family members, so the SBA and the department of education, they talk to each other. So, if you’re defaulted or delinquent with the Department of Education, then the SBA is going to be less likely to allow you to access funding,” said Smith.
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