Yankeeslover writes
“M GO BLUE.... I pay roughly $225.00 per month...If I divide by 12 that comes to $19.00...if I pay $20.00 more per month, what will this acchive? will that even put a dent in what I owe? im just courious...... thanks...”
From the info gleaned from your posts..
You borrowed approx $21K (calculated from payment, interest rate and loan term) at an interest rate of 9.9% with monthly payment $225 for 15 years.
Per an Amortization calculator
HEREYour average Principle payment per month is about $55 for the first year and monthly interest is about $170
The last year (yr15) of your loan Principle payment per month is about $210 and interest is about $15
Adding $25 per month (for the "life" of the loan) additional PRINCIPLE payment to your loan payment will reduce the length of your loan by about 35 months or 2 yrs and 11 months..
Adding $55 per month (for the "life" of the loan) additional PRINCIPLE payment to your loan payment will reduce the length of your loan by 63 months or 5 yr and 3 months..
You see, the beginning of the loan is where you pay the most interest ( about 1/3 Principle and 2/3 Interest), basically you pay the most interest during the first 2/3 of the loan terms or in your case 10 years. Once you pass 10 years (2/3 paid) your payment to the Principle is larger than the Interest.
By adding a small amount against the PRINCIPLE amount borrowed you can easily reduce the time length of the loan and at the same time save yourself a lot of interest cost (Paying excessive interest on goods and services simply eats up your "buying power")..
The amount of interest you pay depends on the remaining amount of UNPAID PRINCIPLE so paying back extra against the Principle really can make a dent in how much time it takes to pay off and in the end dramatically cuts down on the Interest you have to pay..
You do not need to “double” your payment but simply match the PRINCIPLE that is being paid back per month. The interest and length of the loan will drop dramatically if you do this.
I would start at paying $55 extra per month to the PRINCIPLE if you can swing it.
You WILL need to make sure you indicate how the extra amount is to be applied, loan companies automatically assume it is towards the entire loan and will not apply it to the Principle amount borrowed.
If you can’t swing $55 right now then $25 but I would recommend doing something as opposed to doing nothing.
The more you can swing now the better it will be later..
Rant on.. (sorry if this "offends", it isn't meant to but most likely will come off that way)
For those who say that they cannot “afford” to pay extra against the Principle, I say baloney.
$25 per month can be “found” by not eating out at a fast food restaurants as often, by reducing once a month (IE family of 4 eating at the tarnished arches typically costs $25, family of 4 eating at Subway will set you back $30 and that is if you split two foot long subs).
$55 per month can be found by reducing your dining out at Red lobster or most any steakhouse by once a month for two people..
Or perhaps reducing movie night out (admission of a family of 4 with all the snack fixings can easily cost $80)..
Even simple small things like not eating out every day at lunch time during work hrs.. Reduce that to four times a week and easily save $8 per week..
I make and carry my lunches to work (leftovers from home cooked meals and even simple sandwiches, these leftovers are dirt cheap and require very little effort), saves me at least $40 a week or $160 per month. My DW does the same so we actually “FIND” $320 a month by NOT eating out during working hrs!
How about the cost of “soft drinks”, “energy drinks” and such bought from vending machines, that stuff is pricy and really contributes nothing to your health or wallet.. Cut back even just one 20 oz bottle of soda out of a vending machine for the week and you save $1.50-$2.00 right there.. You PAY for the convenience.
Don’t get me started on expensive, exotic coffee shops..
Don’t go buy a new vehicle just because your current ride is no longer in vogue or is “boring”, or you are simply tired of looking at it.. If it is paid for, keep it for a while and fix as needed as long as the repairs don’t add up to a monthly payment every month..
Eat a lot of premade frozen foods? Very expensive (and not to mention terribly loaded with fats, sodium, sugars). Even fully precooked frozen boneless chicken will set you back $6 per pound. You can often buy FRESH refrigerated boneless chicken for $2 per pound..
Folks often just don’t understand, care or want to know where the money goes…
I challenge anyone to take one week and write down, tracking every single thing they buy, you will be shocked at just how much money is spent and on what it is spent on…
Create a monthly written budget, keep track of where and what the money is spent on, doing so will point out the places where you can find some lost money.
There ARE creative ways to find money, but it takes EFFORT to do so, it is far easier to simply pay the interest and have less buying power..
Rant off..
I will now step down from my soap box and allow the angry mobs attempt to storm the castle walls..
OP, I would suggest you take a look at the Amortization calculator in my link above and put your numbers in and play with different amounts and ways of paying off the loan faster..
