If your bank takes the extra payment and applies it to interest first, you can work around this by paying your extra payments at the same time that you make your monthly payment. This way the money will go towards the principal. If you have the option of making a principal-only payment, make sure that you check the box on the payment slip and then double check to make sure they are being applied directly to your loan. The key is to make extra payments consistently so you can pay off your loan more quickly. However, just making extra payments with money that you get from bonuses or tax returns is better than just paying on the loan. If you want to pay off your credit card, you will need to make more than the minimum payment each month to reach your goal. A mortgage may have a clause where you cannot pay it off early within a certain percentage of time to prevent you from refinancing right away. Although it can be frustrating to pay a fee, you will likely still save money on interest if you pay it off early. However, this may change where you put this debt on your debt payment plan. Additionally, if you are close to the time where the penalty lifts, you may end up saving money by waiting for that period to pass. A few month’s of interest payments will likely be less than a $1,000 penalty. If your bank does not charge any extra fees, you may choose to do it each time you are paid. This will make it easier to apply the extra money you receive as soon as you get it. This strategy will stop you from spending the money before it goes towards getting out of debt. It is also important to carefully pick the order that you pay off your debts. Focusing on just one debt at a time will help you maximize your extra payments and help you get out of debt more quickly. This is because it will reduce the principal on one loan and reduce the amount you are paying on interest. Paying off your highest interest loans first can help you save money and speed up the process. 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. If it is a car loan, you should expect the bank to mail you the title to your car within the next few weeks. In some states, you may have to contact your local DMV to have the lien holder removed from the title. If it is a credit card, then you will just need to check your next statement to make sure you do not owe any additional interest. Be sure to check the statements and your balance. You do not want to end up with a ding on your credit because you forgot to pay off the last little bit of accrued interest. Going into the bank to make the last payment can help you avoid this situation.
