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9 Loan Hacks That’ll Save You $$$ On Interest

Today’s post is contributed by Jamie, a freelance writer-for-hire with a passion for all things finance. Having written for a number of online and print publications, Jamie loves to share tips, tricks, and helpful advice he’s learned along the way. Please share your opinions by commenting below.

Let’s face it, no one likes to pay interest. Hell, at times it feels like you’re being robbed in broad daylight, right? You’ve already done a deal with the devil and signed your foreseeable financial future away on the dotted line for a loan, and yet here you are being charged more for the privilege. It kinda sucks.

Unless you’re leading a loan-fueled interest revolution – drop us an invite, would you? – there’s little you can do to avoid it. Loans without interest just simply don’t exist, and if they do (hi, friends and family) then there are often more than a few strings attached. What you can do, however, is find ways to reduce it, work around it, and ultimately save yourself some $$$ in the process. How so? I’m glad you asked!

Let’s kick this off with the basics:

1. Pay if off faster

Ok ok ok, so this might not be a hack, but there’s no point enlisting ‘Six Weird Tricks To Paying Off Your Loan. Lenders Hate Them!’ if you don’t have the basics covered. If you want to maximize the benefit of these or other tips you come across, you need a solid foundation of sound financial practices.

Sounds fancy, right?

In reality, all you need to do is use a little common sense to get your financial life back on track. Don’t flash the plastic and throw everything on credit cards. Avoid building more debt when you’re trying to pay it off. Sit down and get a budget together. If you already have one? Now’s the perfect time to revisit it. Most of all? Do whatever you can to find an extra dollar or two to throw at your loans.

The sooner you pay off your loan, the less you’ll have to pay in interest. It’s that simple. But many of us – guilty! – often don’t have two cents to rub together let alone a spare $50 to throw at loan repayments. If this sounds familiar, consider some of these simple yet effective ways to get some extra cash together:

  1. Go and get that pay rise or promotion you deserve

If you’ve been holding off on having that long-overdue talk with your boss, now’s as good a time as any to do it! Oh, just make sure you’re prepared before you do!

  1. Turn your hobby into a bonafide money maker

Whether you’re a butcher, a baker, or a candlestick maker, sites like Etsy, Fiverr, and Redbubble can help you turn a pretty penny from your favorite hobbies.

  1. Start a side hustle

Online surveys? Rent out your car? Budding freelancer? The modern second job isn’t what it used to be. With the power of the internet at your fingertips, picking up a side hustle is easier than ever.

2. Rope in a loan guarantor

Shortly I’ll cover how big an impact your credit score has on the interest rate you pay, but if you don’t have time to improve your credit score, you’re pushed for time, or otherwise need money now, having a friend or family member act as a guarantor on your application could be the next best thing.

Well, kinda.

Let me explain:

They say many hands make light work, and that’s the way lenders tend to view guarantors. Sure, a guarantor doesn’t pay off the loan on a monthly basis – that’s still your job – they will, however, have to cough up the cash if you miss repayments, come into financial difficulty, or otherwise default on your loan.

In this way the bank or credit union have their security, you get your low rate loan, and your buddy gets…the joy of having a large sum of potentially owed money hanging over their head?

Ok, so it isn’t that great a deal for whoever co-signs with you, which is why you need to read up on the ins-and-outs of how this works before getting the all clear. It’s just one of the many things you should know before you apply for a loan and lock yourself – or a friend – into a bad rate.

3. The friends and family rate

What are family or friends for if not offering a safe place to fall?

Well, as we’ve just discussed, they make great loan guarantors, but that’s beside the point!

If you find you’re failing to get ahead of that ever-compounding interest, consider offering your debts to a trusted (emphasis on trusted!) family member or friend who might have the cash to take it off your hands – for a reasonable fee.

Say, for example, that you have credit card debt running at 18% APR. Instead of continuing to toss money into the fire that is high interest rates, offer it to someone you trust for 9%. They’d be earning a high interest rate that handily beats what they’d earn with that cash sitting in a bank, and it cuts your interest rate in half.

That’s what I call a win-win for all involved!

4. Improve your credit score ASAP

If you’re still in those starry-eyed pre-approval days, then you’re in luck! Before you submit your application, consider improving your credit score first.

Yawn!’, you say.


I know! But it’s one of the best ways to unlock a lower interest rate, and that’s why we’re here, right?

If you don’t know what your credit score is, then now is the perfect time to check. It’s easy, too – you can do it online! Long story short, your credit score is a numerical indication of your financial history, and its what lenders use to decide if you’ve been naughty or nice this financial Christmas aka how trustworthy and reliable you are as an applicant.

At worst, a poor credit score could see you facing an outright loan rejection. At best? You’ll have access to a lower loan amount, and a much higher interest rate.

As long as you haven’t signed on the dotted line, there’s still something you can do about it!

Try these ideas:

  1. Pay your bills…on time.

A wizard may arrive precisely when he means to, but you’d be lucky to get away with that excuse when explaining why your payments are late. Pay your bills on time, every time, and you’ll quickly be seen as the financially reliable citizen you want to be.

  1. Dispute errors

Human errors do happen, so check your credit report and ensure nothing out of the ordinary is hidden within its pages, whittling away at your credit score and your hopes of landing a low interest loan.

  1. Keep balances low on credit cards and other revolving debt

Large amounts of debt are an easy indication that you’re already struggling financially, so a future lender isn’t likely to throw a whole bunch of extra low interest credit your way.

  1. Keep your credit card accounts open

Keeping debts to a minimum is a must, but this doesn’t mean you should close down all of your accounts and credit cards. Some ongoing credit can actually improve your score – it builds a reputable credit history, so long as you’re making your payments – while a blank file makes it that much more difficult for a lender to make a decision.

  1. Avoid making multiple credit applications

Avoid applying for too many lines of credit or loans in too short a space of time. This can make you look desperate, while the repeated checks of your credit report can be held as marks against you.

5. Make bi-weekly payments

Lenders would generally have you making one nice, concise monthly repayment, but now’s the time to stick it to the man! They can’t tell you what to do!

This one doesn’t even require any spare cash. That’s right, you can save money without spending a cent.

How’s that for a hack?

As mentioned above, loan interest is usually calculated at the end of the month using the current balance owing.

By making your payments twice monthly, you’ll still pay the same amount, but the interest will fall as there’s less money owing. Even a small adjustment to the way you’re paying can save you hundreds if not thousands in interest over the life of your loan.

Want to supercharge this hack? Do exactly what I’ve outlined above, but make your payments every 14 days on the dot. You see, months are strange in that they’re often a little longer than ‘just 4 weeks’. By making your payments every two weeks, you’ll actually fit in an extra payment each and every year.

Cross some more days off the calendar, because that final payment just got one step closer!

6. Set up automatic payments

Ah, technology! Smart phones, 4G data bills, and the joys of ordering who-knows-what at 2AM in the morning from Amazon. It’s this technology-inspired freedom that’s at least partly to blame for growing debts, I’m sure, but you can also use it to your advantage to save money too.

How? It’s easy. Many lenders offer a lower interest rate if you sign up for automatic repayments. While the rate change may be miniscule, even small changes such as these can save you heaps. And you’re not even spending anything!

Better still, set up these automatic payments so that they’re made every 14 days as the previous step recommends, that way you’re saving even more without having to spend a cent or lift a finger.

Who knew it could be this easy?

7. Try consolidating your loans

In the eyes of a lender, debt is a big no-no. If you’re already making payments? Debt consolidation can be an effective way to reduce interest rates, paperwork, and the hassle of managing multiple loans.

They’re a fast track to paying your loans off soon, as you’re paying less interest.

Well, most of the time. Debt consolidation isn’t for everyone, so like most things it’ll depend on your financial circumstances. While your rate may be lower, the term can often be longer, so you may pay more. This is why it’s important to throw any money saved from this lower rate at your newly consolidated debts and wipe them out once and for all.

8. Take advantage of P2P Lending

There’s no better way to stick it to the big banks and – quite literally – cut out the middle-man than Peer-to-Peer lending. What’s more, you’ll often find yourself able to access a lower rate on any loans than you would a comparable lender.

The idea behind Peer-to-Peer lending is simple: those who need cash are connected – often through a website or similar platform – to people willing to lend it. People that are, more often than not, regular Joe’s just like you looking to diversify their investments.

Not only do most Peer-to-Peer lending platforms have somewhat more lenient lending restrictions – those with a bad credit score in need of a loan do need apply – their interest rates are often multiple % lower than comparable loans from bigger financial providers.

As we’ve discussed, doing your research and weighing up your options before you apply is one of the easiest ways to save money, and Peer-to-Peer lenders should make the cut for your considerations!

9. Consider life insurance cash value loans

Do you have a random life insurance policy from a grandparent that you don’t know what to do with?  Well then, there may be a better use for it your life than as a liner for your underwear drawer.

Long story short? A cash value loan is charged at a simple rate, versus other third-party debts which is usually charged at a compounding rate.  Swap a compounding rate for a simple one and see how fast your debt is paid down.

Before you decide to take out a loan on the cash value in the policy, check with the insurance company or a financial advisor and have them explain the mechanics and financial implications of doing so.

Want to learn more? See My Mattress Money’s post on Simple Interest Loan, Funding Compound Returns.

Anything to add? Please share!

One comment

  1. Great list of suggestions. #5 is an old trick to save on interest and to pay a loan off quicker than scheduled.

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