Nobody wants high interest loans…but sometimes life happens. Because we know you really don’t want these obscene loans, we created an entire post that’s centered around how to get rid of high interest loans. We’re going to talk about getting rid of personal loans, car loans, student loans, and we’re also going to answer other questions like…
- Is high interest rate on a loan bad? (this seems obvious…but this question comes up frequently, so let’s be sure to cover it!)
- How can I get out of a high interest loan?
- What is the fastest way to pay off a high interest loan?
- How to get out of debt with bad credit?
If you’re sick of high interest debt, you’re going to love this post!
Quite a few people still ask this question: “Is a high interest rate on a loan bad?”
The answer is pretty straight forward.
Absolutely yes!! It’s bad!
For one, you’re throwing extra money away. And second, the higher the interest, the harder it is to pay off the debt (since your payments each month are higher).
And, the ultimate goal for financial freedom is to not be in debt. So if you have a high interest rate loan, now is the time to get out of it.
How Can I Get Out of a High Interest Loan?
If you have a loan with a high interest percent, you aren’t stuck. There are ways to get out of a high interest loan.
In fact there are a few different ways to get out of a high interest loan.
- The first would be to pay it off in full. However, most times our budgets don’t allow for that.
- So the second option is to try to move the loan to a lower interest rate or institution.
- For example, there are credit cards that will allow you to transfer your current balance for 0% interest, and won’t charge you if you pay the balance off in full within a certain time period. So if your current credit card is at 23.99% interest, this could be a HUGE savings.
- The same goes for personal loans, car loans, and most other loans. Check around and see if you can transfer your loan to a place with lower interest, thus being able to pay the balance off faster.
How to Get Rid of a High Interest Car Loan
Want to learn how to get out of a high interest car loan?
You’ve really got three solid options:
- Sell the car and use the money to pay off the debt (if you’re under water, first you should save up the amount you’re under water by, then sell the car)
- Take out a personal loan through your credit union with a much lower interest rate, and use that to pay off the car.
- Earn more, spend less, and pay off the car as quickly as possible. Then you can keep the car and no longer have payments or interest.
How to Get Rid of High Interest Student Loans
Some college loans come with high interest. You may not have noticed when you first got them, but now that you’re out of school and are making the payments, you definitely notice!
Want to figure out how to get out of high interest student loans?
Of course you do!
Here’s some options to pay off your high interest student loans:
- Take out a personal loan from your credit union at a lower interest rate, and use that money to pay off the high interest student loans
- Bust your butt to pay it off as fast as you can. Get a great job, take on side hustles, and act like you’re still living in college (ie. I mean keep expenses low…not party every night). I bet you can get rid of that debt far faster than you think!
How to Get Rid of High Interest Installment Loans
An installment loan is a general term for quite a few different types of loans. If you borrow a lump sum of money and pay that money back with equal installments over a period of time, you have an installment loan.
This could be:
- a personal loan
- auto loans
- student loans
- mortgage loans
Most loans are installment loans.
The point here though, is that you may have a high interest installment loan…and you’d obviously rather not have it.
So what’s the answer here?
What’s the solution for how to get out of high interest installment loans?
Just like most of the above methods, you’ve got a couple solid options:
- Take out a lower interest loan and pay off the high-interest balance
- Buckle down and earn more, spend less, and put as much money toward the high interest loan as possible each month! Pay it off faster than anyone believes you can! You likely won’t regret it.
Want some help getting started with a better financial life? Check out the Get Started Pages that are offered on this site! They’re super helpful, and FREE!
How to Get Rid of High Interest Personal Loans
This whole time, we’ve been talking about getting a low-interest personal loan and applying that to your high-interest loan. But, sometimes even personal loans have a high interest rate!
What if you’re facing this? What’s the secret for how to get out of high interest personal loans?
It’s honestly not that much of a secret, and there really isn’t any short cut. You’ve just got to suck it up and pay it off.
- Take on extra hours at your job
- Start your own simple business (like mowing lawns or shoveling driveways)
- Get a weekend job
- Go through your spending one line item at a time and cut everything out that you don’t absolutely need
It doesn’t sound fun I know, but once that high interest loan is dead, you’ll do a dance and forget about how hard it was to pay off. You’ll just be happy you did it!
What Is The Fastest Way To Pay Off A High Interest Loan?
We eluded to this a bit earlier, but I want to be clear if you do in fact want to pay off your high interest loans quickly.
There are a few things you can do. The first would be to try to lower the interest rate (see in all the options above).
But you can also pay your loan off faster by:
- Trying the debt snowball method
- Side hustling and using the extra money to pay off the debt
- Making bi-weekly payments instead of monthly payments (which also means making extra payments over the course of a year)
- Using any windfalls (like tax returns) to pay off your debt
- Debt consolidation (only if all other options don’t work)
You can even mix and match these different options, which can help you increase the amount you can pay off.
Paying off debt when you live paycheck to paycheck is hard. Trust me, I know. And it always seems like an endless cycle that you’ll never get out of.
Unfortunately for some, there really are only two ways to do this:
- earn more money, or
- cut out all your expenses except your four walls (roof, food, transportation, clothes).
But luckily, there are many ways that you can increase your income (one of the benefits to capitalism!). And, cutting out unneeded expenses is a short term sacrifice that can have long term benefits.
How to Get Out of Debt With Bad Credit
Have bad credit?
Want to get out of debt?
Perfect! You still can.
Too many people think that to get out of debt, you need to have sparkling credit.
This is false.
Sure, it would help if you could get a super cheap loan to pay off your high interest loan, but it’s not a prerequisite to getting out of debt!
Even if you have bad credit, you can still do most of the stuff we already talked about in this article!
You can still:
- Work more hours at your job
- Get a weekend job
- Start a side hustle
- Make bi-weekly payments
- Put any windfall you may have toward your debt (ie. tax returns, insurance claim money, inheritance, etc.)
Having bad credit is no excuse for staying in debt. In fact, it’s a great reason to get out of debt because it means most of your loans are probably high interest loans!
Want to know how to get out of debt with bad credit?
Work harder! Sacrifice for a year or two so you can have an amazing few decades later in life! I promise you it’s worth it!
Other Notable Methods to Get Rid of High Interest Loans
We’ve explored a few options for how to get rid of high interest loans, but most of them centered around making money money. What are some other solutions to getting out of your high interest loans?
Having a good budget is an absolute necessity and an example of common sense money habits that people too often forget. If your budget is chaotic, so is your spending. Before you know it, you’ll find yourself falling deeper into debt. Take stock of everything you are spending, even if it’s just a few bucks for a parking ticket.
Yes, even the little things that might seem inconsequential gradually add up. Many banking apps now allow you to keep track of what you spend in individual stores or even vending machines.
Match your outgoings with your incomings and look at where you can save. It’s best to do this on a spreadsheet so you can easily keep track.
Saving goes hand in hand with budgeting. By creating a budget, you will be able to see what you are saving each month. You also need to put your money away at the beginning of the month rather than at the end because otherwise you will end up spending it.
Once you’ve got into the habit of saving and you start to see the numbers grow, it will become addictive. Having savings also means you have cash aside for emergencies, which is never a bad thing.
3) Take Out a Home Equity Line of Credit
Becoming truly financially free means eradicating debt. But sometimes, finding a source of money to address the debt is difficult. If you can obtain a lump sum of money and clear that debt off, you can then move on to saving your money rather than it all going towards paying things off.
Taking out a home equity line of credit is an option where you can use your house as collateral for a loan that you can then use to get rid of all outstanding debts. If you have any questions about how you can go about doing this, there are guides online that can give you all the information you need to know.
4) Cut Out Unnecessary Purchases
When you are at the store making purchases, do you ever stop and think about whether you really need what you are putting in your basket? There are essentials such as food and hygiene products, but you pick up little things along the way that you will probably end up throwing away.
Don’t make these purchases.
They are wasting your money and the money you spend will add up. You can, and should, program your mind to break this habit ASAP. This can also be said for subscription services.
If you are not really using it, then is it worth paying for?
How to Get Rid of High Interest Loans – It’s Time to Get Started!!
As you can see, there are many ways to get rid of high interest loans, save more money, and set yourself up for financial freedom. It may take some time, hard work, and a few sacrifices, but it’s well worth it when you no longer have to worry about debt!
So are you ready to get out of your high interest loans? I hope so!
Which of the above methods will you implement to pay off your debts? Tell us in the comments below!
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant and course launching expert. When she isn't spending time with her daughter and husband, or crying over This Is Us, you'll find her teaching other mompreneurs how to scale their business without scaling their workload.