The Advantage of Bi-Weekly Loan Payments

1. The Advantage of Bi-Weekly Loan Payments

2. Most households will spend more money on their mortgage than taxes, utilities, and other expenses combined. In fact, the only expense that has ever come close to costing me as much as my mortgage is day care. And yet, I've found that the simplest and easiest way to reduce this expense in the long term is to make semi-monthly, or bi-weekly, payments. If you are paid on weekly or bi-weekly basis, you'll find that you actually earn thirteen months worth of pay vice twelve. For those of us who are paid every other week, that means that twice a year we receive three paychecks in a single month.

3. Need to do the math? Well, a year has fifty-two weeks, which when divided by four weeks per month equals thirteen "months." But this is besides the point. The point is that twice a year, you receive extra pay and now we get to decide what to do with it! Of course, you will still have groceries to buy and day care to pay, but many of your fixed expenses, such as your mortgage, auto payment, and utilities, were covered in the first two checks that you received this month. Because these fixed expenses are charged monthly--vice weekly--the expenses are typically budgeted for under the presumption of two paychecks a month. Twice a year when you have three paychecks, the "mortgage" and "auto" payment portions of your budget are available for making additional principal payments against your loans.

4. Making bi-weekly payments is most beneficial for loans and credit cards that accrue interest on a daily basis. If you have credit card debt, then you may want to consider this as a method of getting yourself out of debt and paying less interest before you begin to tackle your mortgage payments. Paying these accounts bi-weekly allows you to reduce the principal amount every fourteen days vice twenty-eight. Accordingly, you'll save fourteen days of interest on your payment, further reducing the interest charged and being able to pay off your debt earlier. Speed the process up even more by making payments online. By electronically transferring funds, you save yourself an additional week from mailing and processing.

5. Once you are able to apply this methodology to your mortgage payments, making bi-weekly payments will allow you to make a thirteenth payment that is essentially all principal and no interest. If you are able to make bi-weekly payments from the time you initiate your mortgage, you can shave over six years off of the term of your thirty year mortgage. And that, will save you thousands!

6. Sources: https://halfapayment.com/who-we-are.php http://ezinearticles.com/?The-Advantage-of-Bi-Weekly-Loan-Payments&id=7928758