If you have loans or credit cards, you’re already familiar with interest - it’s the price you pay for borrowing money. While interest is a normal part of almost every loan, it’s only natural to want to minimize how much you pay - allowing you to keep more of your hard-earned money.
Fortunately, you have more control over how much interest you pay than you might think. Most of us want to find ways to pay less, and the truth is, you don’t need a perfect credit score or big budget changes to make a real difference.
In this article, we’ll highlight a series of steps and minor loan tweaks you can make to chip away at interest costs and pay off debts faster.
Step #1: Consider Biweekly Payments
Most people make loan payments monthly. But if you split that payment in half and pay it every two weeks, you’ll make the equivalent of one extra full payment each year - without stretching your budget too thin.
Here’s Why It Works:
There are 52 weeks in a year, which means 26 half-payments. Multiply the half-payments by two, and you’ve made 13 full payments in a year instead of 12.
That extra payment can be applied directly to your principal balance, reducing the amount of interest that will accrue and helping you pay off your loan more quickly.
In addition to saving money, biweekly payments can make budgeting easier because they align with your pay schedule. Paying smaller amounts more frequently can help improve cash flow and reduce the stress that sometimes can come with making one large payment each month.
Biweekly Payment Options:
There are two ways that biweekly payments work.
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Your total loan amount is spread across the loan term you select, for example, 72 months. With this option, your payments will be lower, but the interest costs will be approximately the same as those of a regular monthly loan.
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The other option is to calculate the monthly payment first. Then, divide that number by half. With this biweekly strategy, you’ll make a full extra payment annually - reducing the amount of interest you pay and shortening your loan term.
Pro Tip:
Check with the credit union first to ensure your loan doesn’t have prepayment penalties and to confirm that any extra payments are applied to your principal, not future installments.
Step #2: Round Up Your Payments
A simple trick that is both easy to remember and surprisingly effective is to round up your loan payments. By rounding your loan payment up to the next even amount, you’ll pay down your principal faster and reduce the total interest owed.
Example:
If your monthly car payment is $365, rounding it up to an even $400 adds an extra $35 per month toward your principal balance. That’s an additional $420 per year - all going directly to shorten your loan term and shrink the total interest you pay.
Even modest rounding adds up quickly. The idea is to train yourself to think in “even” payments, such as:
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$225 instead of $196
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$350 instead of $309
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$500 instead of $457
Over the course of several years, these extra dollars translate into meaningful savings and a quicker path to debt freedom.
Pro Tip:
This strategy works wonderfully with home loans. Since mortgages and home equity loans have longer terms, the total interest paid over the life of the loan can be significant. If you pay an extra $100 each month toward the principal balance, you will make an additional $1,200 payment annually - helping to shorten your loan payoff date and substantially reduce total interest costs.
Step #3: Consolidate High-Interest Debt
If you’re juggling multiple high-interest loans or credit cards, a debt consolidation loan can be a game-changer. By combining multiple balances into one new loan, ideally with a lower rate, you’ll simplify your finances and save on interest at the same time.
Debt Consolidation Provides Several Benefits:
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Lower interest rate: Consolidating high-interest loans and credit cards into a lower-rate loan from the credit union will lead to immediate savings. With many traditional credit cards offering rates as high as 29% APR, a debt consolidation loan could cut those rates by more than half!
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Predictable payoff timeline: Unlike revolving debt, a consolidation loan has a fixed term and a clear end date. You’ll remain motivated as your debt-free date moves closer every month.
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Simplified payments: Managing one loan and one due date makes budgeting easier and helps you stay on track.
Example:
Imagine you have two credit cards with the following balances:
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Credit Card: |
Outstanding Balance: |
Interest Rate: |
|
Card A |
$3,500 |
21% APR |
|
Card B |
$4,000 |
24% APR |
By consolidating both into a $7,500 personal loan at 10.00% APR, you could instantly cut your interest rate by more than half. That change alone could save you hundreds of dollars in interest, plus you’ll have a single, structured payoff schedule.
Pro Tip:
You can also consolidate debt by transferring high-interest credit card balances to a lower-rate credit union card. However, debt consolidation loans provide an exact payoff date and set payments, helping you pay less interest compared to making minimum payments on a credit card.
Step #4: Refinance When Rates Drop
When interest rates fall, refinancing can be one of the quickest ways to save money. By switching your existing loan to a lower-rate option at the credit union, you’ll immediately reduce your monthly payment and total interest costs.
Refinancing works especially well for auto loans, personal loans, and even home loans, such as mortgages and home equity loans.
Example:
If you financed your car a year ago at 9.00% APR and rates have since dropped to 6.50%, refinancing could significantly lower your payment and overall cost. Depending on the balance and remaining term, that reduction could save you hundreds or even thousands of dollars in interest.
Refinancing Provides Additional Benefits:
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Adjust your loan term to shorten repayment or reduce monthly costs.
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Remove a co-borrower or update your account details.
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Consolidate other debts for greater simplicity.
Pro Tip:
Before refinancing, consider your current credit score, remaining loan balance, and any associated fees. Refinancing might sound complicated and time-consuming, but it’s one of the easiest and quickest ways to save money on your current loans.
Bonus Step: Make Extra Payments When You Can
Anytime you can contribute extra toward your loan’s principal, you’ll save on interest. Even one-time lump-sum payments, such as tax refunds, work bonuses, or side income, can make a noticeable difference.
It’s important, however, to specify that your extra payment should go directly toward the principal balance, not future payments. This distinction ensures that you immediately reduce the amount on which future interest is calculated.
Example:
Instead of rounding up your payments (Step #2) each month, you could make a one-time annual payment that coincides with tax season. For instance, you might make a $1,200 payment toward your mortgage’s principal balance every April when you receive your tax refund.
Pro Tip:
Automate your savings for this purpose. Set up a “Loan Payoff Fund” in your credit union savings account and transfer a small amount monthly. When it builds up, apply the balance toward your loan’s principal balance.
Every Small Move Counts
The secret of saving on interest isn’t one big change. Instead, it’s a series of small, consistent actions. Biweekly payments, rounding up, consolidating debt, or refinancing at the right time all help you reach the same goal: paying less interest and achieving financial freedom faster.
These strategies work best when combined. For example, you might refinance your existing car loan to a lower rate - then switch to biweekly payments or round up each installment to maximize savings. Each step adds another layer of progress toward eliminating debt sooner.
We’re Here to Help!
Interest costs can seem unavoidable, but with the right approach, you can minimize how much you pay and regain control of your finances. Whether you’re looking to consolidate high-interest credit cards, refinance an existing loan, or simply create a smarter repayment plan, every step will help put more money back in your pocket.
If you want to learn more about refinancing loans or consolidating outstanding debt, we’re ready to help. Please stop by the Credit Union or call 410-687-5240 to speak with a team member today.