When you chop 4-5 years off of your 30 year loan from a little extra here and there, it doesn’t seem so bad.
My mortgage is set up bi-weekly but I didn’t have to pay extra for it to be that way
you probably did but don’t realize it… nothing in life is free, and banks sure as hell are not setting themselves up to make less money for no reason.
Seriously, why the fuck is there any fee?
I have an M&T SONYMA loan, I make extra payments on it. If I want to do this, I just use my online bill pay through my other bank, and draft them a check, then specify for extra principal.
Yeah, but you can just pay extra towards the principal every month anyways. This is a sweet scam.
They want to charge to do something he can already do for free.
Look at the payment stub you fill out every month. There is a spot there to make a payment directly to the principal, and NOT to make an extra payment that actually pays more interest (like any normal payment) than actual owed dollars.
or
just cut an extra check at the beginning or end of every year, and put that towards the principal with a normal payment.
There is no doubt that bi-weekly payments will pay it down faster, but there are way better (read that as less costly, and faster) ways of doing it.
:tup:
tada… like magic
JustinH & Zerodaze - you’re both missing the one thing that I was looking for / that made this a lot better than sending in extra payments: the ability to treat the loan as a DSI (daily simply interest) to save a lot extra on interest. The short answer is that there is no way to do this.
I see what you’re trying to do, but what would that really save you over the 20 years?
What is the difference between that with a bi-weekly payment, and taking an extra payment, dividing it by 12, and adding that to the principal every month? One, maybe two extra payments?
The 400 it costs to enroll could be stuck in a CD, and be worth more than the difference in 20 years. 
It’s not that I don’t see your point, I just see it from a different angle.
I have my automotive payments set up to pay weekly.
It’s basically the same thing.
I’ve been trying to find a calculator that will give me a comparison of interest paid with all loans terms being the same except for payments being bimonthly vs. monthly and assuming DSI.
this would show how much you would save over the life of the loan.
I can’t find one that appears to work… this was the closest, but I don’t think it’s accounting for DSI:
Newman, is your car loan a DSI? if not then you’re doing it for no financial benefit.
You missed the boat there champ. His loan type determines if this is beneficial.
IF he has a DSI, it will be because he resets the interest counter with every payment.
IF HE DOES NOT HAVE A DSI, then it’s a waste of time, effort and $$. He can simply pay extra toward principal and an extra payment per year over 30 years is 30 extra payments off of your loan. Doing simple math, a 30 year loan has 360 payments. Taking 30 off through 1 extra payment per year cuts 2.5 years off of your loan and who knows how much compounded interest (contingent upon interest rate and amount borrowed) saved off of the life of the loan.
This is a smart move because auto loans are DSI loans typically, and every payment he makes 14 days apart, the interest portion of his amortized loan payment is now calculated on a lower amount with every payment and calculating the interest on a lesser amount.
Example:
Loan made for $10,000 and payment made every 30 days.
payment was calculated based upon interest compounded daily since last payment (30 days ago) and outstanding principal balance.
Loan made for $10,000 and payment made every 14 days. Payment was calculated based upon interest compounded daily since last payment (14 days ago) and outstanding principal balance.
Of course interest is going to be less if calculated over 14 days payment frequency than 30 on this loan type. The previous payment diminished the principal balance and “reset” the interest counter and now it’s calculated off of 14 days and a lower principal balance.
I can give ya the formulas for calculation and you can make an excel spreadsheet if you want.
I’m not that motivated since none of my loans are DSI… I was more just simple curious if it was easy.
This sounds like a good idea for my car loan, I am just worried they wont acknowledge it as a whole payment. I see this happen all the time with mortgages where people try to do weekly or bi weekly payments them selves and it makes a mess of their account.
Indeed. Check with your lender and see if they will allow it.