of ours is to pay off our student loans before the (choke-gasp-choke) 22 years left on our repayment....
Does anyone know the formula to figure out if you make x-amount of payments a year it cuts x-amount of years off your payback?
I've heard if you make one extra payment a year it cuts it in half but I don't know if that is true or not.
I've tried figuring some numbers myself but I'm not getting anywhere.
I don't want us to be in our 60's and we're still making payments....
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12 comments:
search on goggle for loan calculators. Sometimes you can come across one that will let you estimate extra payments in. Good luck!
I'm not sure exactly, but I do know that paying ahead does cut off quite a bit ~ good luck!!!
It's called an amortization chart. I can figure it our for you if you want or Larry probably could figure it out. If you want me to do it then email me your total loan debt, your monthly payment and also your interest percentage.
Love ya!
If you find a magical formula do let me know since I think we will be 80 before our student loans disappear.
I don't know the formula either...but we paid an extra payment on our home every month and had it down to $25,000 in 4 years. (and then we took out a line of credit...lot of good that was) But it does work.
Our goal this year is to get rid of debt too!
So that means I have to spend less..and so I better start cutting coupons!
Here's basically why paying an extra payment each month helps get debt paid faster. It's all based in the interest formula.
Part of the formula is time, which is the time that passes from your last payment to the date the loan cycles / when interest is charged. So if you pay at the first of the month and don't pay again until the first of following month there is 30 or 31 days from the previous payment so that is the number used to calculate your interest. But if you make a 2nd payment on the 20th then there are 10 or 11 days that are used to calculate the interest. Which can cut the interest charged to your loan in half (if it's not a principal only payment then it can cut the interest that's charged in half).
The other reason is the principle. Payments are set up to cover your interest first and some goes to principal until later in the life of the loan more starts going to principal). The first payment takes care of the interest charged when the 2nd payment can go to principal (with installments you need specify, Credit Cards will just post).
So making an extra payment a month helps A LOT in getting the loan paid off quicker.
And Derek is right about amortizing, that's how payments are calculated. So change the variables to fit your need.
Awesome goal!
That's one of our goals too. We hate having those pesky student loans hanging over our heads.....and don't even get me started on our car loan. Oh, how I wish I had absolutely no debt.
Here is a link that will help you figure it out !
http://lmgtfy.com/?q=loan+calculator
I made an excel sheet that you can put in your information and it'll do all the math for you. It also shows what if scenarios if you were to pay additional amounts each month. If anybody wants it, feel free to send me an email and I'll send it to you.
Sherri, I'd love to make double payments on my house. Good for you guys! That is very inspiring! Maybe after this student loan is paid off - (in a gazzillion years!)...
Funny Steve!
Steph, thanks for the explanation.
Derek, thanks for the spreadsheet. It's really eye opening! It's still depressing how long it's going to take us to pay this loan off, but it's way better than 22 years!!
Your friends are smart! :)
I plan on paying my student loans until I die. Actually, I just keep going back to school, so take that Student Loan guys.
Ughh...student loans are horrible! What can I say... I hear ya. It's gonna take forever. It's worth it....right?
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