Some of you must know about this interest stuff.... Graduated college in May. Have a good job now. Got to pay the loan company back........ Anyways, My payment is $291 a month. If I pay $300 or more a month, does it still compile interest? What if I pay $300 twice a month? Does that even lesser the interest? I am looking for a way to stick it to them and not pay any interest. Or, as little as possible.
if it's like any other loan, the less money you owe, the less interest it will accrue and you will end of paying. if the loan is $1000, and you pay $500 this month, interest will only accrue on the other $500 that's left. as soon as you pay that last $500 off, then you're done. the more you pay, the less you'll end up owing.
Interest is calculated off some beginning of period principal amount. Say you borrow $1,000 and if you pay if off as scheduled, you will pay 10% annual interest monthly for 12 months. You're scheduled payments will be: $87.92 a month. The monthly interest rate is approx. 10%/12 = .833% So, the first month, you pay: Interest = ($1,000 * .833%) = $8.33 dollars. Since the monthly payment is $87.92, the difference, or $87.92 - $8.33 = $79.58 goes towards paying down the principal. So at the end of month 1 / beginning of month 2, your new principal amount is $1,000 - $79.58 = $920.42. Multiply this by .833% = $7.67,which is the interest you would pay in month 2. The constant payment is still $87.92, so the principal paid in month 2 = $87.92 - $7.67 = $80.25, and your principal remaining at the end of the month reduces to $920.42 - $80.25 = $840.17. Make sense? If you follow this all the way through the 12 months, you will see that at the end of the 12 month you will have paid off the entire note! As you can see, you pay more in interest and less in principal at the beginning and vice versa towards the end. Now, you can prepay. Which is great. So, in the example above, let's say that in the first month, instead of paying the pre-determined $87.92, you want to pay $100 a month. Let's work through it: Month 1 Interest = Beg. Balance Principal * Rate = $1,000 * .833% = $8.33 Principal = Total Payment - Interest = $91.67 Ending Balance = $908.33 This is obviously less than the $920.42 if you had been paying according to schedule. Month 2 Interest = $908.33 * .833% = $7.57 Principal = $100 - $7.57= $92.43 Ending Balance = $908.33 - $92.43 = $815.90 As you can see, by paying more, you end up paying less in interest every month, and paying down your principal faster. Hope this tutorial helps!!
Appreciate it. I am paying it off as fast as I can! During college it accrued interest. Thank God my mother paid that off!
That's what I was going to say. Do you live by yourself or do you have somebody helping out? My friend's girl took care of all their bills and he paid off about $40,000 in loans off in less than 5 years. He setup up a lot of things too to lower his interest rate. He never missed a payment (after 12 months his APR went down either 1 or half a percentage point), he setup automatic draft and that took off another .5 or 1% point, and he consolidated and that took off some more.
