A college degree abroad is a significant investment. That’s why it makes sense to take an international student loan to finance your degree. For many students, it might be necessary to take multiple student loans.
If you have to take education loans from different lenders, having great strategies in place can save you thousands of dollars in interest. You need to have a keen understanding of all your loans, their repayment terms, and their interest rates.
Paying off multiple student loans can seem overwhelming, but with careful planning and consistent effort, it is definitely achievable.
Here are some effective tips to help you pay off multiple student loans without stressing yourself:
Get Organized
It’s important to get very organized with your finances – including any debt that you’ve taken. At any given time, you need to know exactly how much you owe.
Start by listing down your loans on a spreadsheet. Organize the information in a way that’s easy to understand. Make sure to include key information including:
- Loan servicer
- Loan amount
- Repayment start dates
- Interest rates
- Monthly payments
- Statement balances
By compiling all these details about your student loans, you’ll have a comprehensive understanding of your loan portfolio. The information will guide you in making informed decisions about repayment strategies, prioritizing loans, and seeking assistance when needed.
Review Your Budget
After organizing your loan information, it’s time to review your budget. Doing so will help you to assess your income, expenses, and financial capabilities.
If you’re a beginner with budgeting, it’s important to track your expenses for a month or two to understand where your money is going. Categorize your expenses into fixed costs (e.g., rent, utilities, loan payments) and variable costs (e.g., groceries, dining out, entertainment). This exercise will give you a clear picture of your spending habits.
Analyze your expenses and identify areas where you can cut or eliminate costs. Look for non-essential expenses that you can temporarily live without or find more cost-effective alternatives. For example, consider cutting back on dining out, subscriptions, or entertainment expenses.
Allocate a specific category in your budget solely for your student loan payments. Determine how much you can reasonably afford to pay towards your loans each month, considering your income, expenses, and other financial obligations. Channel the money that you manage to save by cutting down on other expenses towards paying off your student loans.
As your financial situation evolves, regularly review and adjust your budget accordingly. Periodically evaluate your expenses, income, and progress towards paying off your loans. Make necessary adjustments to ensure your budget remains realistic and effective.
Adopt a Debt Repayment Strategy
There are various strategies and methods that can help you pay off debt faster. It’s important to select and commit to a debt payment plan. Here are the three most popular debt payment strategies:
- Debt avalanche: With this strategy, you prioritize the loans with high interest rates while making minimum payments on all other debt. This way, you reduce the amount you’re paying in interest, freeing up more cash to pay down your debt. The debt avalanche method is advisable if you have a high-interest loan.
- Snowball method: With the snowball method, you focus on the loan with the smallest balance and pay it off first. Simultaneously, you should be making minimum payments on the other loans. After paying off the small loans, redirect the payments to the next loan with the lowest balance until all your debt is paid off. Just like a snowball rolling downhill, this approach generates momentum as you move from the smallest to the biggest loan.
- Debt consolidation/refinance: The third method to pay off debt is by consolidation or refinancing. As the name suggests, this strategy allows you to combine all your loans into one. Basically, you apply for a new loan where the lender pays off all your existing loans and rolls them into one big loan. This approach is great if you don’t want to worry about keeping up with various payments and due dates.
Set Up Automatic Payments
Setting up automatic payments for your student loans can streamline the repayment process and help ensure that you never miss a payment.
Automatic payments eliminate the need to manually initiate and track your monthly payments. Once set up, the payments are made automatically, saving you time and effort. This helps you maintain a good payment history and avoids potential late fees or negative impacts on your credit score.
Some loan servicers or lenders offer an interest rate reduction, typically around 0.25%, as an incentive for borrowers who enroll in automatic payments. Over time, this reduction can lead to savings on the overall interest paid.
If you opt to set up automatic payments, ensure that you have enough funds in your designated bank account to cover the automatic payments. Insufficient funds could result in overdraft fees or failed payments, which may negatively impact your credit history.
Increase Your Income
To accelerate your debt payment, look for ways to increase your income. Any additional income can be applied directly to your student loan payments. Identify your strengths and expertise, and find ways to monetize them.
For instance, you can offer tutoring services in subjects that you excel at, provide consulting services in your field of knowledge, or offer freelance services related to your professional skills. You can also start a side business or negotiate a raise at your current job.
Invest in your professional development to enhance your skills and increase your earning potential. Consider taking relevant courses, obtaining certifications, or pursuing advanced degrees that can open doors to higher-paying job opportunities.
Finally, explore passive income opportunities that generate income with minimal ongoing effort. This could include investing in stocks, bonds, or real estate.
If you need financing to fill funding gaps for your studies in the US, 8B is here to help. You can apply for an international student loan without a cosigner or collateral.
Join the 8B Community to network with other African students in global universities.
