How to make the most of college loan repayment?
Choice 1. Your goal is to pay down the principal as fast as possible. Interest rates are pretty low now, at least here in Canada. If you can find a loan that has a lower interest rate than your student loan, which here in Canada is fairly easy, one thing you can do is pay off your student loan in one go, and then pay back the lower interest loan. (Though interest rates are so low you might not save that much if your loans aren’t huge.
Um, choice 1 says: I understand that funds paid in addition to my present amount due will first be applied to satisfy any outstanding fees and interest and any remaining funds will be applied to my principal balance. and choice 2 says: I understand that funds paid in addition to my present amount due will first be applied to satisfy any outstanding fees and interest and any remaining funds will be applied to my principal balance. So it sounds like there is no financial difference if you pay the same amount at the same time regardless, and never miss a payment.
You need to look at your agreement (NOT your payment coupon) and make sure you actually can pre-pay and have it impact the principle. Note the language: will first be applied to satisfy any outstanding fees and interest and any remaining funds will be applied to my principal balance So you may not be accomplishing anything. The two choices would seem to indicate that you are, but the language seems to allow wiggle. Note this article which talks about no-prepayment clauses. Please note, however, that your loan may have a prepayment clause that prevents you from being able to reduce the interest paid. If that’s your situation then you most certainly want to find another destination for this money which will make you some interest.
