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Written byShaun McGowan
Reducing the amount of interest you pay is one of the easiest ways to get a cheaper personal loan, and there are a few other ways to reduce the total cost of your loan and your total amount of debt.
Here are 3 simple things you can do to make it happen
The shorter your loan term is, the less interest you’ll pay. Choosing the shortest term possible which you can afford to meet repayments on will help reduce the total number of payments, and the total amount of interest charges.
Your regular loan repayments cover both the principal amount and the interest charges. At the start of your loan, your payments will mostly cover interest charges, while at the end of your loan, you’ll mostly be reducing your principal amount.
Extra repayments only reduce the principal balance. The sooner you can make extra repayments on your loan, the more you can save on interest charges - just make sure you can make extra repayments without incurring additional fees!
Paying fewer - or lower - personal loan fees can free up cash to make extra repayments. Look closely at all personal loan fees such as late-payment fees, extra payment fees, or early break fees.
Choosing the right loan for your unique circumstances can be more complicated. Getting a personal loan that isn’t right will mean paying more money over time than you need to.
For example, if you wish to purchase a car, you might want to see if you qualify for a secured car loan, not a personal loan that you will use to buy a car. While they may sound like very much the same product, they are not:
You can still buy a car using either, but a personal loan may cost you much more if you are only buying a car.
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $10,000 over 3 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.