@Anonymous wrote:
@M_Smart007
Why did the author choose "$90 lowest ‘safe’ balance" here?
I see that my loan is reflected in NFCU account now and I paid off the 45xx and I see that my min payment is 29.62. But want to understand that why did that OP choose $90 and setup min payments as $5 on AP.
@Anonymous: You want to make sure that the life of the loan is not cut short. If the balance gets below the monthly payment of $88.50 then the minimum payment due at the time might force you to pay the loan off early. The author rounded the $88.50 to $90 for easier calculation.
As I pointed out in the other thread, the calculation the author uses to justify the $5.00 is not valid. I used a spreadsheet to determine how much one can pay every month without having to pay the loan of early and came up with $7.96. But there is no real reason to pay the maximum. So paying $5.00 each month is just fine.
But be aware, that since you paid off more than 90% of the loan and so are paying much less interest, the required minimum payments will force you to pay off the loan after 57 months. And depending on your monthly autopay amount, you will have to increase your monthly payment already before that. If you pay $5.00 a month, then the payment due after 54 months will be larger than $5.00. If you pay at least $6.85 only the last two payments will have be larger.
My calculation are based on a $5010.00 loan, initial payment of $4567.18 on the second day, 2.25% APR and some random choices for the exact payment days. So the actually numbers will be sligthly different. Therefore, I would recommed to pay somewhere between $1.00 and $7.00 each month. I probably would pay $7.00.
