Accelerated Payment Plan: The Power of Biweekly Payments
When it comes to paying off loans, many people wonder about the quickest way to cut down their debt. One strategy that’s growing in popularity is making biweekly payments instead of the usual monthly ones. This approach can significantly shorten your loan term and save you money on interest. But how does this all work? Let’s break it down.
Understanding Biweekly Payments
So, what exactly are biweekly payments? Instead of making one big payment each month, you split that payment in half and pay it every two weeks. This means you’ll end up making 26 half-payments in a year instead of 12 full payments. Confused? Don’t be! It’s like adding an extra payment each year without even really noticing it.
The Monthly vs. Biweekly Payment Showdown
Imagine you have a loan with a monthly payment of $400. If you stick to monthly payments, you’ll make 12 payments a year. On the flip side, with biweekly payments, you’ll pay about $200 every two weeks. Over the course of a year, that’s 26 payments, which equals 13 months’ worth of payments instead of just 12. This extra payment goes a long way in reducing the principal of the loan. The lower the principal, the less interest you pay over time.
How Biweekly Payments Work Your Favor
Think of your loan as a mountain. Every payment you make chips away at that mountain. Monthly payments are like a slow steady climb, but biweekly payments bring you to the top faster. By regularly reducing your principal, you lessen the interest charged on the remaining balance. This one-two punch starts cutting down not just how long you’ll be in debt but also how much you’ll pay in total. Over time, those savings can be substantial.
The Importance of Interest Rates
Here’s something to consider: the interest rate on your loan can make a significant difference. Higher rates mean more interest tacked on, but biweekly payments help minimize those extra charges. By knocking the principal down faster, you’re effectively lowering the amount of interest you’ll pay in the long run. It’s like having a discount on the cost of borrowing!
Who and What Accounts Are Eligible for the Accelerated Payment Plan?
Anyone that gets paid weekly or biweekly is an ideal candidate for this plan. About 43% of employees get paid biweekly and 27% get paid weekly. Any type of installment loan such as a mortgage, car loan or personal loan are eligible for this plan. Credit Cards are not eligible, but most can be added to our Debt Management Plan which offers biweekly payments.
The Bottom Line
Choosing biweekly payments can be a smart move to get rid of your loan faster and save on interest. It’s all about making those extra payments work for you. With a little discipline and strategy, you will find yourself debt-free much sooner than you thought possible. So, if you want to reach that summit of financial freedom quicker, contact DebtWave for a free quote!