@Ultros, I'll use my new SSL with PenFed as an example:
- 10-Apr-2021: I initiated a $3,000 SSL with a 36 month term; balance $3,000; 1st due date 03-May-2021
- 16-Apr-2021: I made my first payment for $500; balance $2,501.01; next due date 03-Nov-2021
- 14-May-2021: I made my second payment for $500; balance $2,004.94; next due date 03-May-2022
As you can see, overpaying this type of loan doesn't change the term of the loan, it simply pushes the next due date out into the future. My going forward plan is to pay a little over $500 for both June and July (to account for interest), and then in August switch to a monthly $175 payment through November; by that point the loan should be about 89% paid off. In January of 2022 I'm going to pay $50, this will push the loan down under the magical 9% threshold, and from there I'll let it ride, just making a token payment here and there to cover the interest and keep the balance sitting right at about $250. Finally, January through March of 2024 I'll make the final three payments which will in turn pay the loan to zero.
@Ultros wrote:
@Horseshoez wrote:@Ultros, I'll use my new SSL with PenFed as an example:
- 10-Apr-2021: I initiated a $3,000 SSL with a 36 month term; balance $3,000; next due date 03-May-2021
- 16-Apr-2021: I made my first payment for $500; balance $2,501.01; next due date 03-Nov-2021
- 14-May-2021: I made my second payment for $500; balance $2,004.94; next due date 03-May-2022
As you can see, overpaying this type of loan doesn't change the term of the loan, it simply pushes the next due date out into the future.
Yes, I understand that, but my question is this:
Is the next due date is pushed by the number of monthly payment equivalents you have made, or by the percentage of the loan you have paid off?
In this case, since you paid $3.93 on interest for a balance of $2501 over 28 days, it seems that the interest rate is about 2%. In this case you are paying ~3% of the final value in interest if following the original schedule, so the due date won't change by much either way. The difference will increase for longer loan terms and/or higher interest rates.
My understanding is that the due date is pushed by the number of monthly payment equivalents being made, at least for NASA FCU. I paid the loan down to under 10% by making 50 months of monthly payments, and the due date has been pushed forward by 50 months, however there are less than 6 months worth of payments left on that loan, meaning if I continued to make monthly payments on that pushed due date, I would only have 6 months left on the loan, give a month due to interest accrual.
I don't honestly know, or even care for that matter, whether the payment is pushed based upon the number of payments or the percentage. Either way it won't make much of a difference. As for the interest rate, IIRC, it is 2.05%.
Regarding the rest of your question; I guess I don't understand what you're asking.
@Ultros wrote:
@Horseshoez wrote:I don't honestly know, or even care for that matter, whether the payment is pushed based upon the number of payments or the percentage. Either way it won't make much of a difference. As for the interest rate, IIRC, it is 2.05%.
Regarding the rest of your question; I guess I don't understand what you're asking.
You should not care for that matter, since it makes basically no difference in the case of your SSL how the pushing works. As I mentioned, it only makes a difference if the term is long or if the interest rate is high, neither of which apply to you.
My question was trying to figure out how @USMC_Winger has managed to prevent his loan from ending early despite making the payments early and paying less interest. As stated in my example, my 60-month loan will end early in 56-57 months because I prepaid and reduced the total interest payments on the loan.
I'm still not fully sure the source of your confusion; my assumption is @USMC_Winger (Semper-Fi by the way) paid his loan ahead, skipped a bunch of payments, and then simply made the final few on schedule to get the loan to close as originally forecast.
@Ultros wrote:
@USMC_Winger wrote:I think I've avoided this by recalculating the interest owed if I set my Navy Fed SSL to auto-pay $1 every month until the final payment. I paid my loan down from 8.9% of the original $3,000 loan to $102.05 eight days before the first payment was due and set up auto-pay for $1. If my calculations are correct, my final payment will be a few cents more than the original final payment 59 months later.
ETA: Nothing special about the 8 days prior to the due date. That's just when I got around to doing the calculations.
Hm, how would you go about doing this?
@Ultros, I made my own calculations so I know the amounts I need to pay and when.
Is this an action that you have to perform with the bank (please re-amortize my loan), or something else?
They don't re-amortize the loan, or else my next payment would be due next month. Navy Fed recalculated the interest owed due to my paydown, and reset the next payment due date with a partial payment, so that the following payment after that would be my full, original monthly payment. This would result in paying off the loan 5 months early if I followed Navy Fed's new schedule of not making any payments for the next 4 years and 4 months, all the while accruing interest, before starting my monthly payments.
But I'm not following Navy Fed's exact payment schedule. I made my own calculations so that after my paydowns and 58 months of $1 auto-payments, I'd still owe nearly $53 on the final, 60th, monthly payment. Meaning I'd finally match Navy Fed's original schedule on the final payment.
Every time I make a monthly payment, Navy Fed will recalculate the interest owed and reset the partial payment amount of my next payment in 2025. After the 58th month, Navy Fed's recalculations will finally match my schedule, and Navy Fed will tell me my next partial payment due will be $1. The month after that, my 60th payment, will be the nearly $53 balance, which will end my loan. On time.
From what I understand about the loans, unless it is re-amortized you won't get the full loan term, it will roughly be reduced by X%, where X is the percentage of interest paid in total if you made all payments according to the original amortization schedule.
My understanding is this:
If you open a loan for $1000 for a term of 100 months and a total payment of $1200, your monthly payment is $12, pre-paying $912 would shift your due date by 76 months, but only leave $88 on the loan. The $88 of balance will of course continue to accrue interest, but it won't be enough to create 24 months' worth of payments, which is why the loan will end early.
Correct. That loan would end early. This is slightly different from my plan, because I'm forcing Navy Fed to recalculate my interest owed and next loan payment amount every month I make another payment. If my amortization calculations are correct, my loan will be 60 months long, not 55.
@Ultros wrote:My question was trying to figure out how @USMC_Winger has managed to prevent his loan from ending early despite making the payments early and paying less interest. As stated in my example, my 60-month loan will end early in 56-57 months because I prepaid and reduced the total interest payments on the loan.
@Ultros, my plan is to force Navy Fed to recalculate my next payment amount and due date every month to get my new loan end date to move beyond Dec. 2025. But ultimately, if Navy Fed says my next (and final) $53 payment is due Dec. 2025 (or earlier), not Mar. 2026 (my original final payment month), then I'm cancelling my $1 auto-payment and paying that $53 balance in Dec. 2025 (or earlier), closing the loan several months early, just like everyone else's (which is the most likely scenario).
My plan A is to get a mortgage in 2024, so if all goes well, my SSL will already be paid off and closed before 2025. But I'll monitor my SSL's next due date and amount due to see whether my monthly micro-payments help push the next due date out further or shrink the loan length even more and report back here.
As this thread is over a year old and its no longer being updated it is scheduled to close 06/15/21. If anyone wants to create a new thread on subject and keep it current please contact an active moderator about it.
