The best way to do this is to determine how much extra you can afford to spend.Then calculate the amount of interest you are paying during the life of your loan.How much interest do you save by adding that extra amount to your loan and thus paying it off early.(For help try Bankrate’s mortgage calculator and Fin Aid’s student loan prepayment calculator.) Now take that amount of money you would put into extra payments and calculate how much interest you can earn by putting that amount into a CD or other high yield savings account.
Any other loans are probably not eligible for tax deduction unless you are using them for work.
If the amount you’d earn in one of these is higher than you’d pay, then maybe you’re better off doing that and then applying the money earned to the loan later (which is not likely at this time, since interest on savings accounts and CDs is quite low!
) Note: if you are a savvy investor, you could potentially earn more money by investing the extra money into the stock market.
You should then allocate the extra money to pay off your loans early. Some lenders charge a fee for early repayment of a loan.
To find out if you could get hit with these fees, just go back to the paperwork you signed upon loan origination and comb the fine print for prepayment fees.