Hi all. Hope you can help illuminate me on this subject.
Some years ago, a friend (now deceased) told me a trick for paying off a loan at great speed and saving on interest. She explained the math and logic but darned if I can remember. The process was thus: She said to get a printout of the monthly payments over the life of the loan with the principal and interest in separate columns.
I was then to pay off the whole month, principal plus interest, as well as the month two's principal. The next month, I would pay off the third month's principal plus interest, as well as month four's principal. On month three, it would be principal + interest for month 5 + principal for month 6, and so on.
Obviously it's paying back the loan faster, but why should it be done in this manner? Has anyone heard of this? I'd gladly ask her... if she was on this earth.
There are a lot of tricks out there when paying off loans to save interest. Anytime you pay extra towards the principal you will always save money and pay off the loan early. For example, paying 3x your monthly payment would pay the loan off even faster than what was suggested. It's all based on budget and you should most usually pay as much as you can on a loan as you can, in most situations. Play around with amoritization tables to see the impact when paying: