The National Student Loan Centre says that it takes Canadian students an average of 9 years to repay their loans. And because student debts in Canada can reach as high as $25,000, it’s all the more crucial for students and recent graduates to plan out and deploy effective strategies to repay them as soon as possible.
The Canadian Federation of Students reports that Ontario has the highest average debt load in Canada, which is over $28,000. So if you happen to be a student in Ontario, then it must be rough for you. But worry not, as this article will give you all the necessary tips and solutions on how to pay off student loans faster, in Canada.
Ways To Pay Off Student Loans Faster In Canada
1. Know Your Debt First
When college students hold money, they simply go with the flow, skimming through their statements, and simply look for the due date and the minimum payment. And this is a bad thing because it means that they’re ignoring the amount of interest that they need to pay for their debts and how long it’s going to take them to pay those debts off. These are some of the things that you need to be wary of to give you clarity on how to pay your debts off.
Once you have a proper understanding of your debts, the interest attached to them, and then compare it to how much you’ll save if you pay them off a little quicker, only then will you understand how better off you’ll be financially in the long run. With this knowledge in your hands, you’ll learn to manage student debt and hold back unnecessary spendings and view more towards saving.
2. Make Sure To Read The Fine Print
Sometimes, there is confusion involving the grace period of student debt repayment. For instance, payments for a provincial loan aren’t necessary for the first six months of a student’s post-graduation. However, the interest on the loan’s federal side usually starts from the first day, thereby resulting in an abnormal amount of debt to accumulate. That’s why we suggest you give yourself a head start on settling those debts to downsize their impact.
Students also don’t compare the interest rates of credit loans and lines. Sometimes, the financial institution’s student line of credit may consist of a lower interest rate than that of the national student loan; one can be used to pay the other off, while also maintaining the balance that’s on the lesser interest line.
3. Build An Emergency Fund
Building an emergency font is another great way to pay your student loans faster, according to Loans Geeks. You’ll need to do this right after you complete school, as you don’t want to use your credit card to pay for unforeseen or abrupt expenses, such as accidents, or an emergency operation. This is especially if your income has immensely dipped.
4. Look In Your Finances, Especially Your Spending
Not everything in the world deserves your money. Sometimes, the best thing to do would be to cut back. That’s why budgeting is one of the ideal student budget help that you can find.
Go through your credit card and banking statements, receipts, add monthly bills to get a better understanding of your finances. Now tally all of those expenditures to determine your spending baseline. That way, you can create a realistic budget that will give you more freedom in the future.
Some of the everyday items that you’ll need to take into account include the following:
- Subscriptions, housing, and bills
- Miscellaneous other unnecessary spendings
And lastly, your monthly student loan payment amount. You’ll be quite surprised to know the amount in all these aspects, both good and bad.
You should ask yourself if you need items like pizza, chips, new clothes, games, and beer every day, 24/7. Do these things necessarily provide any practical benefits? Are they even worth spending when there are better things to do with that money?
Setting up a budget will allow you to save up for emergency funds to prepare for the unexpected. Establish your budget and stick to it religiously, and your efforts to pay off your student loans will be made that much easier.
And just remember that if you’re using a credit card, you use one that is flexible, offers cash-back facilities, and has no extra fees attached to it. In this case, we recommend you get yourself the Tangerine money back credit card.
5. Make Lump-Sum Payments
As its name implies, a lump-sum payment is making a one-time payment to either pay all of your student debts off or, at the very least, reduce the overall balance. These payments will first go to your loan interest and then the principal, which is the amount that one borrows.
We advise you to make these one-time payments during school or the six-month post-graduation period. Making any payments at those times will transfer the amount to your loan’s principal. However, you’ll still be making your monthly payments regularly.
To make a one-time payment even during regularly scheduled payments, you need to visit the National Student Loan Service Center (NSLSC) website. Just to sign up and create an account on that website, add or update your banking details, and then use it to make your one-time payment.
You can also add the national student loan service center as a payee via your online banking site. The loan number can be used as a 7-digit account number.
6. Take Care Of High-interest Loans First
Once you’ve done your budgeting, gather all of the loans that have higher interest rates so that you can get them out of the way first. If you’re going to start repaying those debts right now instead of waiting for the grace period, you need to focus on the one with the highest interest.
Once you’re through with your grace period, make minimum payments on every one of your loans – targeting the ones with higher interest will have a much more significant impact on your debt repayment process.
7. Ask for Help
No doubt, there are plenty of useful resources available online that you can refer to, but it’s never a bad thing to ask for help, especially when you can’t come to a decision. Therefore, we suggest calling up the National Student Loan Center to ask them what sort of payment options you can opt for.
To get the proper student loan debt advice you’re looking for, use any one of the toll-free numbers:
- 1 888 815-4514 (within North America)
- 800 2 225-2501 (outside North America)
You can even send them an email through their contact form.
8. Use Tax Break
If you’ve already claimed the interest that’s paid on your student loan via your income tax return, put the additional money to good use, by which we mean your student debt repayment. Although it is tempting to use that money on a long vacation or an unwanted shopping spree, it would be better to rid yourself of all your debts before you do any of that.
Putting yourself in a better financial situation means that you will have to make some hard sacrifices from your end. But later on, you’ll soon realize how thankful you’ll be to rid yourself of all your student debts by following our strategies in this article.