Construction projects can be an expensive undertaking to complete, and often require loans to cover the costs of labor and production. Financing a construction project can be a daunting task no matter your financial situation or how you’re connected to the project. Between securing a loan and coming up with the methods to pay it off, it’s easy to feel overwhelmed. However, there are several ways to help pay off your construction project loans. If you’re looking for ways to pay off your construction project loan as quickly as possible, here are 4 tips to help you get started.
Make Biweekly Payments Instead of Monthly Payments
If you can swing it, you can choose to make biweekly payments instead of monthly payments, which can help you get out of debt faster. When you decide to make biweekly payments, you end up making one extra payment per year. Doing this, the payments will begin to add up over time which can help you save on interest payments. If you decide to choose this method, just be sure to notify your lender before you start making biweekly payments, as some lenders may charge a fee for this service.
Additionally, if your loan is for a shorter term, making biweekly payments instead of monthly payments can help you save on interest and pay off your loan faster. For example, when you make a payment every two weeks, you end up making 26 payments per year instead of 12. Following a timeline like this can shave months or even years off of your loan repayment timeline. If the loan is for a longer term, you can still make biweekly payments, but the timeline for repayment will, of course, likely still be longer. That being said, any amount of money that you can put towards your loan will help reduce the total amount of interest that you pay over the life of the loan.
Refinance Your Loan
Other methods of paying your construction loan off can include trying to refinance the loan. Interest rates on construction loans are often higher than the rates for traditional mortgages, so if rates have gone down since you first took out your loan, refinancing could save you money. So, you can explore the possibility of refinancing your loan if interest rates have dropped since you first took out your loan, or if you want to change the terms of your repayment timeline.
In addition, by refinancing so you make payments over a longer period of time, you can free up some cash flow each month. This could come in handy if your construction project is taking longer than expected and you need some extra breathing room in your budget. However, keep in mind that there are costs associated with refinancing, so be sure to compare the total cost of refinancing with the amount you would save over the life of the loan before making a decision in order to avoid adding more debt to your plate than you were likely expecting or may be able to handle.
Make Additional Principal Payments When Possible
Making additional principal payments when you can afford them is a great way to reduce the overall interest paid on your loan so far and help you pay to pay it off faster. Anytime you make a payment that includes additional money towards the principal balance of your loan, you are essentially making progress in paying off the total amount borrowed.
If your lender doesn’t offer the option to make additional principal payments, you can simply send in a check for the additional amount you would like applied to the principal balance of your loan each month. Just be sure to include instructions telling the lender how to apply for the payment. By making regular, additional principal payments, you’ll see a significant reduction in the total interest paid on your loan, as well as the length of time it takes to pay off the loan.
Look into Loan Modifications
If you’re overall struggling to make your loan payments, you may be able to modify the terms of your loan to make things easier or more realistically possible. Deciding to go with a loan modification can lower your interest rate, extend the term of your loan, or both.
If you’re interested in pursuing a loan modification, reach out to your lender to discuss the process and what specific options may be available to you. Keep in mind that loan modifications are not available for all loans, so be sure to check with your lender to see if you qualify. Some situations that would not apply would include if your loan is already in default or if you have filed for bankruptcy. That being said, if you are current on your payments but are struggling to keep up, a loan modification may be a good option for you to explore in order to get relief and stay on top of your debt.
These are just a few tips to help you pay off your construction project loan as quickly as possible in order to save on interest and get out of possibly falling into debt. By taking methods such as making biweekly payments, refinancing at a lower interest rate, making additional principal payments, and looking into loan modifications, you can save money on interest and get out of debt faster. So take action today and start working towards removing the loans currently looming over you.
