What does financial freedom mean to you? Paying cash for a new car, or the freedom to make decisions without worrying if you can afford it? The definition differs from person to person, but it generally means being able to afford the lifestyle you want while maintaining control of your finances. For some retirees, paying off a loan may be a step toward financial freedom.
3 tips for paying off a loan
1. Budget
If you don’t have a budget or your current one doesn’t take loan payments into account, it’s time to remedy this ASAP! A budget allows you to see how much you can allocate toward a loan and calculate the date you can expect to have it paid off. Temporarily cut unnecessary spending on things like streaming or meal delivery services as needed.
2. Pay more than the minimum balance due
While it can be tempting to pay the minimum due on a loan each month, this habit won’t make a significant dent in the principal balance. You’ll end up paying more in interest over a longer duration of time.
Tip: Did you know payment history accounts for 35% of your credit score? Learn more about this and how to improve your score in General Electric Credit Union's (GECU) free eBook The Ultimate Beginner's Guide to Credit. Download your copy here.
3. Refinance
Are you paying an arm and a leg in interest? If so, refinancing allows you to replace an existing loan with a new one. This may give you access to more favorable interest rates, potentially lowering your monthly payment. Refinancing may come with fees, so it’s important to determine whether the cost outweighs any potential savings.
How a credit union can help
Credit unions are not-for-profit. They exist to serve a community formed by a “bond of association,” such as where you live or work. You'll see their commitment to members through lower fees and rates than you might find at a bank – something you could potentially take advantage of to secure more favorable loan terms during a refinance.
The best credit unions also offer free features to members which make budgeting easier. At GECU, members can access Money Management through Online Banking or our mobile app.1 This secure platform helps you create a budget, see trends in spending, and set and track goals.
Paying off a loan can take time, but it’s possible with a gameplan and the right support! GECU offers a variety of loan payment options. Visit a branch, give us a call, or utilize Online Banking or our mobile app to make payments. If you plan to stop by and visit, take advantage of appointment scheduling so you can skip the lines once you arrive!
