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Why is my interest paid and principal paid fluctuating so much.

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Valued Member

Why is my interest paid and principal paid fluctuating so much.

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



Message 1 of 9
8 REPLIES 8
Established Contributor

Re: Why is my interest paid and principal paid fluctuating so much.

It's really hard to give an accurate answer because you are missing the information on the principal remaining for each period. Since the interest that you are paying is the total accruing each period and the excess payment is being applied to the principal, the amount of interest would likely be decreasing. You already said you're sure your interest rate is fixed, so it's not that.
There is also the loan servicer factor; they constantly mess stuff up. If you can and ask for an account Specialist they should be able to look deeper into your account and see what's going on, if anything.



Message 2 of 9
Valued Member

Re: Why is my interest paid and principal paid fluctuating so much.

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. 

Message 3 of 9
Valued Member

Re: Why is my interest paid and principal paid fluctuating so much.

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.

 

PaymentDays since last paymentInterest PaidDaily Interest Charge
4-Sep3149.331.59
4-Oct3047.141.57
4-Nov3148.071.55
Message 4 of 9
Valued Member

Re: Why is my interest paid and principal paid fluctuating so much.

Hey, sorry for the late response. Thank you so much for your breakdown! Once you put it into daily interest charges I see now how it all works out. Once again, thank you so much!
Message 5 of 9
Valued Member

Re: Why is my interest paid and principal paid fluctuating so much.

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.

Message 6 of 9
Established Contributor

Re: Why is my interest paid and principal paid fluctuating so much.

 



Message 7 of 9
Valued Contributor

Re: Why is my interest paid and principal paid fluctuating so much.

@mrf311 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.

 

PaymentDays since last paymentInterest PaidDaily Interest Charge
4-Sep3149.331.59
4-Oct3047.141.57
4-Nov3148.071.55

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.




Garden goal: Completely clean reports and a gold spade (which, at my current rate, is never going to happen...)
Message 8 of 9
Valued Member

Re: Why is my interest paid and principal paid fluctuating so much.

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. 

 

Message 9 of 9