Could Rounding Up What You Pay Help You?

Having a debt – perhaps a mortgage or a car payment – may feel as if you have a ball and chain around you for the duration of the loan. Is there a way to lessen the load?

One option is to simply round up your payments.  Suppose your current car payment is $360 per month.  If you round up and make monthly payments of $400, that is like making one extra payment during the year on your car, and the extra money goes toward the principal on the loan. You’ll reduce your interest costs, and you will also pay off the loan faster.

Here’s a mortgage example: if your mortgage payment is $900, but you pay $1,000/month, the extra $100 goes toward the loan principal. That’s an extra $1200/year!  If $1,000 is too much for your spending plan, try $950, which is an extra $600 per year. Over several years, either strategy will save thousands in interest and get your mortgage paid off years early.  Read the fine print on your contract. Make sure your lender accepts larger payments.  Need to know so it helps your cause.

You can use the same strategy with any credit card bills where you are carrying a balance, and on any other loans, as well.

Every time you round up you’re getting closer to debt freedom without feeling much of a pinch. Once you start this habit, it will be hard to break. Fortunately, it’s a very helpful habit!

 

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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