Get The Most Out Of An Extra Student Loan Or Mortgage Payment

February 27, 2019

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You don't have to be a math wizard to know sending in extra money will pay off debt faster.  However when it comes to your student loans, there is a specific time you should send extra money. While your credit card employs a compounded interest system, where the accrued interest is added back into your balance and you end up paying interest upon interest which makes a higher balance, your student loans and mortgage is much simpler.  In fact its call simple interest, where your interest accrues daily in between your payments.  So the longer you wait to pay, the more of your payment goes to interest. So to get the most out of an extra payment, make it the day after your scheduled payment is ideal but remember each day there is an additional interest accrued. The trick is to make sure your additional payment does get applied to your next scheduled payment.  Most student loan servicers will offer an option to apply your additional payment without crediting it for the next scheduled payment.  Also, in many circumstances you will have multiple loans so if you want your extra payment applied to a specific loan, you'll need to specify that when making the payment. Then you'll want to check your statement once the payment is made to ensure it was applied the correct way.

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SOURCE: Lifehacker

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