How Can You Reduce Your Total Loan Cost?

Navigating through loan repayment can be a daunting task, but with the right knowledge and tools, you can significantly reduce the cost burden. The key is understanding the various strategies that exist to minimize the financial impact of loans. Here I’ve culled the top 5 ways to effectively reduce your loan costs and manage your debt more efficiently.

Before Getting a Loan

Shop around for the best rates

One of the most effective ways to reduce your loan cost is by shopping around for the best rates. This means getting quotes from several lenders and comparing their offers to see which one is the most competitive. It’s important to note that interest rates can vary widely, depending on the lender and the type of loan. Even a small difference in interest rates can have a big impact on the total cost of your loan over time, so it's worth taking the time to find the best rate.

Consider a shorter-term loan

Another way to reduce your loan cost is by choosing a shorter-term loan. While shorter-term loans typically come with higher monthly payments, they can save you money in the long run because you’ll be paying less interest overall. For example, a 15-year mortgage will have a lower interest rate than a 30-year mortgage, which can result in significant savings over time.

Watch for extra fees

In addition to interest rates, make sure you know what closing costs and other fees to expect (appraisal fees, credit report checks, taxes, prepaids, title fees). Some loans come with extra fees, such as origination fees, prepayment penalties, and other charges that can add up quickly. Be sure to read the fine print carefully and ask lenders about any additional fees before signing on the dotted line. Also try negotiating with the seller to help cover the closing costs as part of their seller concessions. Understanding all the costs associated with your loan will help you make an informed decision and choose the most cost-effective option.

If You Have An Existing Loan

Make extra payments

If you have the financial means, adding an extra payment to your loan each year can significantly reduce the total cost of your loan. By making an additional payment, you can reduce the principal balance more quickly, which means you’ll pay less interest over time. Even making small, incremental payments throughout the year can help you save.

Refinance your loan

Refinancing your loan can be an effective way to reduce your loan cost. If interest rates have gone down since you took out your loan, you may be able to refinance at a lower rate, which can save you money on interest over the life of the loan. However, it’s important to consider other factors, such as loan fees and closing costs, when deciding whether to refinance.


Reducing your overall loan cost may seem like a daunting task, but it can save you a considerable amount of money in the long run. By shopping around for the best rates, considering a shorter-term loan, making extra payments, refinancing your loan, and watching out for extra fees, you can significantly reduce the total cost of your loan. Check out our other blog posts and our main web page for more information on loan costs, requesting a loan and lenders. Always be sure to do your research and explore all of your options before committing to a loan.