It is likely that paying off loans early sounds like an excellent idea, and sometimes it can be. However, completely paying off some loans, such as a mortgage, or debt agreement, may not always benefit. We have put together some to pay down your loan to save on interest, as well as alternate options.
There are a few ways to shorten the life of your home loan and save on interest, the first being making accelerated payments. In this scenario, you would make more payments than are necessary in order to accrue less interest over the life of your home loan. Another option is to make lump payments once or a few times a year, which, again, will mean less interest is charged.
Some professionals will make alternate suggestions as to what you should do with extra money, instead of paying down your mortgage. The options are endless, and completely depend on your personal goals, but could include making an investment, or saving for home renovations. Renovating your house can either improve your forever home, or increase your resale value for the future. Be careful when selecting what to do with these funds, as some options are likely not to be beneficial. For example, a car loan will often have a high interest rate, so will often not be a good investment for your 'leftover' cash.
Customers often ask if our debt agreements are able to be paid off early. The answer is yes! However, as our agreements are interest free, it is not always advisable to pay them off early. We often suggest that instead customers put extra money aside into savings, for example, to build a house deposit.
Ultimately, at the end of the day, the decision to pay down a loan faster is up to you. To make things a bit clearer for you, think to yourself what your long term financial goals are. If your goal is to pay off your mortgage as quickly as possible, and become debt free, put your extra cash on to your home loan. If you would prefer to have some cash available for investments or other reasons, putting all your money into your mortgage is probably not best suited to you.
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