Do you want to apply your additional payments to principal-only?
As a general rule, making extra payments just toward the principal balance can help you pay off a loan faster and reduce the overall cost of the loan. But you’ll want to make sure your lender accepts principal-only payments and won’t penalize you for making them or paying off your loan early.
Can I make extra payments on my student loans?
1. Make extra payments the right way. There’s never any penalty for paying student loans early or paying more than the minimum. But there is a caveat with prepayment: Student loan servicers, which collect your bill, may apply the extra amount to the next month’s payment.
Why do you have to make principal only payments on student loans?
Making extra payments to the principal on student loans is a way you can free up funds sooner to apply to other financial goals – such as saving up for a down payment on a house. As you consider this option, be sure you get a handle on what to know about making extra student loan payments on the principal only.
What happens when you pay extra for student loans?
Be sure to pick the right principal balance. If you do pay extra towards your student loans, lenders apply the extra payment in different ways. They cannot just count the extra payment as interest. What they can do is spread the payment out towards all of your student loans.
How do I make extra principal payments on my loans?
You can make the payment in person if you want to pay the extra amount, or you can send in your final payment by mail or pay it online. You should check the next statement to make sure that you have paid everything off, and that you do not owe any additional interest on the loan.
Is there a penalty for making extra principal payments?
A few month’s of interest payments will likely be less then a $1,000 penalty. Once you understand the fees associated with extra payments and the way that your payments are applied to the principal, you can come up with the best strategy to pay off your loan more quickly.
