There are a number of ways to reduce the amount of interest paid on a loan

**Accelerated payments**

Accelerated payments are a new trend in paying down a loan sooner.

With accelerated payments, the monthly payment rate is calculated, and divided by 2 (for accelerated bi-weekly or accelerated semi-monthly) or 4 (for accelerated weekly) payments.

Over the course of the month, the borrower pays the same total amount as if it was a monthly payment, however as that payment happens more frequently less interest is accrued and the loan is finished sooner.

**Pre-pay as much as possible**

Pre-payment of a loan will pay down principal faster, and prevent as much interest from accruing on the loan.

This can be an early payment on a loan or a regular additional payment on a loan.

As an example, a $10,000, 10 year loan at 10% interest compounded annually with annual payments will have a total of $6,274.54 in interest paid over its term. A $9,500 (only $500 less) will have $5,960.81 in interest paid over the same term – for total interest savings of $313.73.

**Longer compounding terms**

Longer compounding terms (such as annual or semi-annual) will reduce the amount of interest accumulated on a loan while shorter ones (such as daily or weekly) will increase it.

This is because shorter compounding terms create compound interest at a greater rate.

**More frequent payment terms**

More frequent payment terms (daily or weekly as opposed to semi-annual or annual) will pay down the principal of the loan faster, meaning that less interest accumulates on the loan.

**Negotiate a lower interest rate**

Many lenders are willing to consider a lower rate, especially in higher interest rate markets (such as credit card debt) where the debt can more easily be consolidated.

**Consolidate for a lower interest rate**

If lenders are not willing to lower a debt, then consolidating for a lower interest rate is possible.

With consolidation, a new loan is taken out to pay off other loans – often with the new loan having one lower interest rate than all the combined loans. Sometimes this is with a personal loan, other times it is through an addition to a mortgage or credit line.

**Shorter loan timeline**

A shorter loan timeline will mean far less interest paid through the course of the loan.

As an example, a 10 year loan for $10,000 at 10% interest compounded annually with annual payments will have a total of $6,274.54 in interest paid in that time, while the same loan over a 5 year period will only have $3,189.87 ($3,084.67 less) in interest paid in that time.