One of the ways that I've been able to pay off loans at least 2 years early is by paying more than the minimum amount due. I would start off by paying just $5 or $10 more, and then would continue to increase that amount the closer I became to paying of the balance completely. A dollar here and there may not seem like a lot at the time, but it's more about challenging yourself to go above and beyond. Once you see that you can "spare" $5 or $10, challenge yourself to add another $5 or $10 a month and more. To start off, I instituted something that I call an "interest match." It has worked really well on my car and student loans, and I hope to eventually apply the same method to my mortgage. For instance, if your loan payment is $100 per month, a portion of the $100 will go towards the principle balance, while the other portion goes towards the interest. Let's just say that $70 goes to the principle, while $30 goes towards interest. Your payment of $100 only reduces the amount that you owe by $70 instead of the full $100. Over the course of 12 months, that's a loss of $360 that could have gone towards the principal balance owed. Multiply that out over the course of 5 years, and that equates to a total loss of $1800. Can you think of something better to do with $1800 than to give it away to a bank? I know I can. What a nice vacation that would be! The point is, add the interest amount to your minimum payment. In this case, we would pay $130 per month instead of the minimum of $100. That way the principle balance is reduced faster, which in turn will also reduce the amount of interest paid over time as well. Don't get me wrong, you will still lose money by having to pay interest. However, the sooner you pay the loan off, the less money you will lose over time. You might as well take advantage wherever you can.
I often heard that you should pay more than the minimum balance, but I never knew how much more or if a few extra dollars would even matter. I can tell you firsthand that it does make a difference. This is just one way to get you started. If you have any outstanding loans, take a look at your more recent statement and see just how much of your payment went to the principle, and how much went to interest. If you're able, I challenge you to make an interest match on your next payment and stick to it for several months. You should notice a bigger decrease in both your principle and interest payments over time. Once you get into the habit of paying more, you'll be able to apply it to all other loans and debts until you've finally paid everything off. Don't settle for the minimum. Your freedom is worth so much more!
Change requires action!