My brother told me about a provision in any installment loan, split payment and cut repayment time in half?

Question

He also told me this provision is not told to consumers because it cuts the interest paid over the life of the loan nearly in half. If this is true it should be shouted from the rooftops so consumers can save a ton of money.

Answer 1

It's partially true. Interest compounds periodically, so by making a half payment early, you effectively reduce the principal balance of the loan for interest calculations. The same is true for making a larger payment each month. Microsoft has a great spreadsheet for Excel for calculating loan amortization that can show you the effect of an extra $5/mo on your car payment (or similar type of loan).

Answer 2

You can pay every two weeks. This increases your payments from 24 to 26 per year, cutting interest and the time it will take to repay the loan.

You can also do the math and add the amount of the extra two payments to your monthly bill.

There are many other tricks you can use to legimately cut the amount of interest and the time you have to repay your debt drastically.

For example, most people can become debt free in about 8 years - including the mortgage - by using a simple debt acceleration program. Financial software programs usually have a debt reduction module or credit counselors can prepare a repayment schedule for you.

The rub is that you have to stop using credit.

Answer 3

Any time you pay anything early, the principal lowers and the % due decreases.
Just paying 1 extra house payment a year in the early years, shaves off 5 years of payments
Paying 1/2 of the monthly due early, also cuts the principal and so the % due.
SOME lenders are aware of this (& are realy in it for the
% payments) soooo, they have prepayment penalty clauses.
If there is no prepayment clause, pay early whenever you can.

Answer 4

Its your life yet whilst hes homophobic he isnt going to approve,whatever you're saying.yet each so often familly take time to get their head around issues thats in my journey.