Or ... you can pay twice a month and make sure one of those payments is greater than the amount due. Due $200. Payment 1 $200, Payment 2 $100. The best part about it is after a while you will have covered a few payments and depending on the terms of your loan, you may be able to go a few months without paying (I would only do this if I was sure that no payment was due and in case of emergency. interest is still accruing!). Here is the awesome graphic:
Minimum due: $200
Standard:
Payments: 1 2 3 4 5 6 7 8
Amount: due: $200 $200 $200 $200 $200 $200 $200 $200
Paying $300 a month:
Payments: 1 2 3 4 5 6 7 8
Amount: due: $300 $300 $200 ? ? ? ? ?
By month 2 you've paid $600 and hence covered the 3rd month payment and your loan company may tell you you can skip it but here is where your terms come in. During the 3rd month you've acrued interest and not paid it. I overpay aoften and have taken advantage of the skip a month deal so I have had two things happen to me.
One, they incerase your payment for the months left over by a bit depending on your interst rate:
Payments: 1 2 3 4 5 6 7 8
Amount: due: $300 $300 $200 $205 $205 $205 $205 $205
Or, two, they send you a bill for the interest you would have paid had you made a payment:
Payments: 1 2 3 4 5 6 7 8
Amount: due: $300 $300 $25 $200 $200 $200 $200 $200
Either way, it takes discipline and I don't trust myself at times so another thing that some lenders do which you can ask your lender to do is take the payment off the back hence decreasing the life of your loan BUT you WILL have a payment due the next month. Another plus is if you managed to save $50 bucks in interest (you'll probably save more than this), the last payment which comes a month early wil be that much less:
Payments: 1 2 3 4 5 6 7 8
Amount: due: $300 $300 $200 $200 $200 $200 $150 $200
I double pay on almost all of my loans and I recommend it if you can afford it. It reduces money wasted in principal while still allowing you to gain credit history.
Message Edited by berraco58 on
01-10-2008 11:38 AM