What if I told you that simply adjusting how often you repay your loan could save you over $124,000 and reduce your loan term by years? Sounds too good to be true? It’s not—it’s just simple math!
Let me explain how switching to fortnightly repayments (assuming you pay half of your monthly repayment every two weeks) can make a massive difference to your wallet.
The Scenario:
- Borrowers: Jack and Sam
- Loan Amount: $500,000
How Did Sam Save Over $124,000?
When lenders calculate your monthly repayment amount (e.g. $2,997.75), Jack sticks to the standard monthly schedule. Sam, however, splits the monthly amount in half and pays fortnightly ($1,498.88 every two weeks).
Here’s the magic:
- More Frequent Payments: By paying fortnightly, Sam makes 26 payments a year instead of 12—equivalent to one extra monthly repayment annually.
- Faster Balance Reduction: Since interest is calculated daily on your remaining balance, paying more frequently reduces the balance sooner, resulting in lower interest charges over time.
- Shortened Loan Term: With a reduced balance and less interest accrued, Sam’s loan is paid off 5.5 years earlier.
How Does It Work?
A loan payment consists of two parts:
- Principal: The amount reducing your loan balance.
- Interest: The cost of borrowing.
By paying more frequently, a greater proportion of each payment goes toward the principal rather than interest, accelerating the reduction of your loan balance.
Want to Save More and Pay Off Your Loan Sooner?
Consider switching to fortnightly or weekly repayments. Use the calculator below to see how much you could save and start taking control of your financial future today!
https://triplemfinance.com.au/calculators/monthly-fortnightly-and-weekly-repayment-calculator/
