Wouldn’t it be great to be able to repay your student loan sooner than expected and spend more money on experiences or on the things you want? Being debt-free is unimaginably the greatest feeling in the world. What if we told you that it is possible to repay your loan sooner? Before we dive into the ‘how’, it is important to understand the three types of student loan payment options available in Cambodia.

Select a Suitable Repayment Instalment Plan

In general, a student can repay his/her loan via the options below:

1. Zero payment during your studies with monthly instalment plan starting after competition of your course.
2. Pay a monthly instalment to repay the loan interest during your studies. Repayment of loan principal can be done after completing your course.
3. Start paying immediately after getting a loan on a monthly instalment to repay both the loan principal and the interest.

If you opt for the third option, you will be able to repay your loan faster compared to the first and second option.

Pay More than the Minimum Due Payment

The first strategy is to commit to a minimum due payment. A minimum due payment is a periodic payment which includes a principal amount, accrued interest, bank fees/charges(if applicable), and late charges(if applicable). Minimum due payment structure varies from institution to institution, be sure to check with your bank to know the exact distribution of your minimum due payment.

However, what happens if you pay less then the minimum due payment? Let’s say your minimum due payment in February is US$100, but you paid only US$50. In such a case, your remaining US$50 will be accumulated in your next month payment making it US$150 in March. When this happens, it will increase the interest amount as well as prolong the duration of your loan.

On the contrary, if you pay more than your minimum due payment, the excess amount will be adjusted with the remaining principal amount. It will reduce the accrued interest for the future, and you will be able to pay your loan ahead of the agreed tenure.

Refinance your Loan

Another way to pay your student loan fast is by refinancing your loan. If you have a good credit history, you can qualify for refinancing. How can refinancing help you pay your loan fast? The process involves taking a new loan and using the amount of new loan to pay off the old loan. In refinancing, you will get a new time duration to pay off your loan and enjoy comparatively low rates, or you can get both.

For example, suppose that you have obtained a five-year loan to finance your education. After two years of paying the instalments, you get a job or a pay raise. This would mean you are able to pay a bigger amount for your instalments each month. In addition to that, during the two years of your loan term, you have never missed a due date.

In such cases, you can request the bank to refinance your loan. This will essentially be a new loan replacing the previous loan at a more favourable rate and duration in line with your new ability to repay. For example, you could refinance your loan to be done in a year, hence getting rid of your loan quicker!

Now, you’re armed with the strategies to help you to pay off your student loan. To sum up, the three ways to repay student loan are instalment payments based on an agreed plan, paying more than the Minimum Due Payment and refinancing your loan.

All you need to do is to decide on which loan pay-off strategy matches your lifestyle. Put a plan in place and start working on it. In the beginning, a few lifestyle adjustments and sacrifices in your budget need to be made to pay as much of your loan as you can. However, once you are debt-free, you can live your life worry-free!