Making car payments 2x per month?

[Texas97]

I have read that if you make your house payment 2 times per month (1/2 as much each time) that it is the equivalent of making 13 monthly payments due to decreasing interest.

Can I do that with my car payment?

 

[4xChamps]

Of course

 

[Texas97]

does it work as well?

 

[horn4life]

I guess it depends on the loan structure.

 

[Hellraiser97]

It won't have as much of an effect in terms of raw numer of decreased payments, but it will essentially reduce the overall cost of the loan.

 

[capnamerca]

In reply to:

---

---

 

[BA93]

It will end the note faster, but I can't believe you will find any drastic savings. People use the 2X/month mortgage as a huge savings example because the term of the loan is large. By the end, you save a great deal. Sell the house in 5 years though, and the savings is much less.

 

[Texas97]

the math that i saw on the house showed that you basically make the equivalent of 13 monthly payments by reducing the interest. is that not the case with a car?

 

[baboso]

You do reduce the interest, because your principal balance goes down faster.

You are making the equivalent of 13 monthly payments in a year by paying every two weeks:

52 weeks in a year: 26 payments made every 2 weeks: 1/2 of your montly payment made 26 times = 13 payments.

There's the magic you're looking for in this math.

 

[Hellraiser97]

In reply to:

---

---

 

[madscientist]

paying twice a month and paying biweekly are not the same thing.

if you change to biweekly you end up making an extra payment, as noted above. if you pay twice a month, you just pay half now and half later.

 

[Ignatius]

You need to check the terms of your loan; often times, unless you are paying off the full balance, any additional payment above your monthly amount just gets applied to the next month's payments, not to the remaining principal on the loan. This is not unheard of for car loans...

 

[si se puede]

They apply it to your next month's payment unless you send your check to another address with "Principal payment only" written in the memo section.

 

[314]

In reply to:

---

---

 

[mpharut]

agree!