Do u save any money in interest if u make your pymt on the 1st day of the billing cycle vs due date?

[Snoopy916]

Sorry if this is a stupid question.

One of my current auto loans has a balance of about $75k.  My due date is the 22nd of the month, and the new statement gets issued on the first of the month.  Does it do me any good to make the payment on the first vs the last day of the cycle?  Or is it better to just leave it in my savings account to earn 4.15% on that money for 22 days?

thank you

[JoeRockhead]

---

@Snoopy916 wrote:

Sorry if this is a stupid question.

One of my current auto loans has a balance of about $75k.  My due date is the 22nd of the month, and the new statement gets issued on the first of the month.  Does it do me any good to make the payment on the first vs the last day of the cycle?  Or is it better to just leave it in my savings account to earn 4.15% on that money for 22 days?

thank you

---

The only way to really save interest and money on any loan would be to pay down the principal faster, therefore reducing the interest accrued over the life of the loan. An easy way to do this is add 1/12th of your payment to your regular monthly payment. For example, if your regular payment is $1000, you would add roughly $84 to it and continue to pay that every month. That extra money goes towards your principal and over the course of a year winds up with you making 13 full payments instead of 12. If you continue to do this over the life of the loan you'll end up paying the loan off several months early. The more you add to your payment, the faster you'll pay it off and in turn the more you'll save in the end.

[Snoopy916]

Thanks. I know that. I guess my question was more academic. I just have ocd when paying my bills, i always pay things asap (i might make 10 payments on a credit card esch cycle sometimes). Was just wondering if my craziness of having to pay the bill on day one was totally unnecessary 

[JoeRockhead]

---

@Snoopy916 wrote:

Thanks. I know that. I guess my question was more academic. I just have ocd when paying my bills, i always pay things asap (i might make 10 payments on a credit card esch cycle sometimes). Was just wondering if my craziness of having to pay the bill on day one was totally unnecessary 

---

Well, I guess we'd have to do some math. If for example you had 5k in an account earning 5% that would come out to roughly $.068 a day in earnings or around $255 for a year. In your case of around 22 days,(I think is what you said), that would be around $15. On 50k at 4.2% it would be more like $5.87 per day earnings.

In Contrast, if you have a 75k car loan at 6% that will cost you $14,493.59 in interest over the life of the loan (6 years), or $6.62 per day until its paid in full. It really comes down to how much you have in your interest earning account and what interest rate and term you're paying on the loan, then compare the figures.  

[Beefy1212]

Yes the sooner you pay the less interest will be paid, although by a very tiny rate.

paying 22 days early...

1 dollar at 6% is 6 cents per 365 days paying 500 dollars 22 days early is about a $1.80 more towards principal, at 4% APY savings that is about 1.20 not earned or 60 cents a month savings or 2 cents per day

Now making bigger or even extra payments on interest bearing debt greater than the savings rate in a HYSA has a much greater effect.

Easy way to decide this is simply look at your loan APR vs savings APY... If APR > APY then pay early and as often as you can safely. If APY > APR pay as little and as late as safe.

[Shooting-For-800]

I would assume that any simple interest loan is getting calculated daily.

So, yes, you save money by paying any amount before it is due.

As far as earning interest...don't forget that you are paying taxes on that as well.

BTW - what savings account is paying you over 4%?  Any balance limit?  What is you car loan rate?

[Beefy1212]

---

@Shooting-For-800 wrote:

BTW - what savings account is paying you over 4%?  Any balance limit?  What is you car loan rate?

---

Lots of them https://www.forbes.com/advisor/l/high-yield-savings-accounts/?utm_content=TP_High_Yield_Savings_Phra...