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Hi, I have student loans that I have been paying off and noticed something interesting. When I look at how my payments are applied they fluctuate. I would imagine that as I pay off more of my student loans the amount of interest being paid would go lower and the amount going to principal should be higher with less interest being paid and more leftover for the principal. I've never had any late fees, always paid on time, and have it on auto pay. I'm not understanding how it could vary at all with an interest rate that doesn't change and no fees occuring. Any help is greatly appreciated.
Here's an example of my last 3 payments:
Date Payment Interest Paid Principal Paid
9/4 237.65 49.33 188.32
10/4 237.65 47.14 190.51
11/4 237.65 48.07 189.58
The interest expense is likely accuring daily and there were 31 days between 10/4 and 11/4 versus 30 days between 9/4 and 10/4. The slight increase in interest expense in your 11/4 payment is due to the extra day between payments.
I should have included this with my original reply, but you can see in the table below that your interest expense is decreasing each month.
Payment | Days since last payment | Interest Paid | Daily Interest Charge |
4-Sep | 31 | 49.33 | 1.59 |
4-Oct | 30 | 47.14 | 1.57 |
4-Nov | 31 | 48.07 | 1.55 |
No problem, I'm glad I could help. That's how the interest is calculated on my student loan so I am assuming it's the same for yours as well. Knowing this, when I can make extra payments on my loan, I make them separately during the month instead of with my monthly loan payment. This way most of my monthly payment is applied to principle.
@Anonymous wrote:I should have included this with my original reply, but you can see in the table below that your interest expense is decreasing each month.
Payment Days since last payment Interest Paid Daily Interest Charge 4-Sep 31 49.33 1.59 4-Oct 30 47.14 1.57 4-Nov 31 48.07 1.55
Thank you for this breakdown - I have giant spreadsheet with all kinds of data as motivation for paying down my loans faster (minimum triple what's due most months, some more), and this metric is even more motivating.
Thanks, I feel the same way. For me it was more impactful to see $2+ a day in interest versus $60+ a month. The monthly amount seemed reasonable, but then I thought about how my daily interest was costing me more than my coffee.