Took Out a Personal Loan for Holiday Gifts? 3 Tips for Paying It Off Quickly

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

You might manage to shed that debt sooner than expected. 

Many people run into a dilemma during the holidays: They want to make the season as special as they can for their families, but they don’t have the money in savings to do so. That’s where borrowing tends to come in.

It’s common for consumers to rack up debt on their credit cards during the holiday season in particular. But credit card interest can be very costly, and credit card interest rates can also rise over time, leaving borrowers in a bad spot.

Personal loans, on the other hand, can be a more affordable option for borrowing money. They tend to come with lower interest rates than credit cards do, and just as importantly, those rates are fixed. When you take out a personal loan, you can anticipate predictable monthly payments.

If you took out a personal loan this past holiday season to pay for gifts and other expenses that were important to you, you may have several years to pay that loan back. Personal loans, by nature, aren’t short-term loans that get paid back in 12 months or less.

But there’s generally no penalty to paying off a personal loan ahead of schedule. And doing so could save you a lot of money on interest. So if you’re sitting on a pretty fresh personal loan you want to shed quickly, here’s how to do it.

1. Get on a solid budget

Following a budget might make it easier to cut your spending across the board. And the less money you spend, the more you might have available for loan payoff purposes.

If you’ve never stuck to a budget before, don’t panic. Setting up a budget is easy, because all you really need to do is open a spreadsheet, list your various bills, and total them up. You’ll then want to make sure you’re spending less than what you bring home each month in your paycheck.

There are also various budgeting apps you can use to make budgeting easier. Many of them can even sync up with your credit cards and checking account to help you track your spending seamlessly.

2. Cut back on a non-essential expense

If your rent costs $1,200 a month and moving isn’t feasible, then spending less on rent probably isn’t an option (and getting a roommate for your one-bedroom home may not be a reasonable route to pursue). But if you’re willing to cut back on a non-essential expense in your budget, like social outings or restaurant meals, you might free up a nice amount of money to pay off your personal loan.

Will giving up something fun for a short while be difficult? Sure. But the upside is that you’ll get to shed your personal loan debt sooner — and benefit from unloading that burden.

3. Get a side hustle to boost your income

If cutting back on spending isn’t feasible or desirable to you, there’s another way to free up more money for debt payoff purposes: boosting your income with a second job. The gig economy is loaded with opportunities these days, so figure out how much time you’re able to carve out for a side hustle and find a gig that works for you.

Better yet, find a side job you might actually enjoy. It’s not easy to give up hours of downtime each week. If you’re going to do that, you might as well try to find a job you look forward to, like walking dogs or teaching young kids to play your favorite instrument.

Many people land in debt during the holidays. But if you’re now sitting on a personal loan balance you want to get rid of, you can follow these tips to close out the year debt-free.

Our picks for the best personal loans

Our team of independent experts pored over the fine print to find the select personal loans that offer competitive rates and low fees. Get started by reviewing our picks for the best personal loans.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More