Truck Payments: One Large OR Two Small Per Month

[xxlt250rxx]

If my monthly payment to Ford is $500 per month and I want to pay $1000 each month, is it better to pay one $1000 payment or pay 2 $500 payments? I suspect two individual payments would be better. Also, do you use the Ford Credit app?

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[Ricksc]

I pay every 2 weeks, the total I pay is more then my payment so knocking off payments.

 

[Kodiak]

When it is due if you pay double that will be better than making the payment and then another payment in 2 weeks. The sooner you pay down the principal the less interest accrual cost you pay.

 

[fatBatman]

This is both easy and difficult to explain/understand. What you are describing is "semi-monthly". This is often confused with "bi-weekly" and they are not the same.

With a bi-weekly payment schedule, you pay every two weeks. With 52 weeks in a year, this equates to 26 payments. For semi-monthly, you pay twice a month. With 12 months in a year, this comes to 24 payments a year. Think of it this way, every year is the same (52 weeks) but not every month is the same size (28-31 days). This explains the variation.

The bi-weekly schedule will pay off your loan faster since it would be the equivalent of making 1 extra payment per year. This would slow the growth of interest and you will pay off the loan faster. A semi-monthly payment will not change how the interest grows and will keep your loan on its original schedule.
Paying bi-weekly will decrease the life of your loan for your truck by a few months and is totally worth it if you can keep the discipline of payments. If your payment is $500/mo., it would probably be easier and would be better to make an extra $100 principal payment every month. This would equate to more than 2 extra payments per year and pay it off even sooner than bi-weekly since this extra amount goes directly against the principal and not interest.
Paying bi-weekly on a mortgage however, will make a huge 6-8 year difference in the life of the loan depending on your interest rate. Your mortgage holder would likely be happy to set up that payment plan on your normal auto-pay.

And yes, I use the Ford Credit app. My normal monthly payment is on auto-pay and I make an additional principal payment each month. For me, it's just easier.

I hope this helps.

 

[xxlt250rxx]

And yes, I use the Ford Credit app. My normal monthly payment is on auto-pay and I make an additional principal payment each month. For me, it's just easier.

This is what I want to do. Do you make the additional payment through the app? How do you know all of it is applied to the principal?

 

[gpbst3]

I would double check to see how Ford processes the payments. I assume any overpayment would be automatically applied to the principal but they could apply the midmonth payment to next months.

To keep it simple I would pay make $1000 payment each month.

 

[belairbrian]

Pay $1000 all at once. Half the regular payment half additional principal.

The loan is simple interest and interest accrues on a daily basis based on the principal.
The $500 reduction will result in a lower daily balance sooner than waiting 15 days to mak another payment.

 

[lurch]

Pay off whatever debt you have with the highest interest rate first. I'm really in no position to give advice so this is a well meant suggestion if it might apply. I f you carry any credit card debt with a higher interest get rid of that sh*t first.

 

[BMCGC]

Your interest charge is determined by the principal balance and the number of days since your last payment.

Example:

Your loan was made on Jan 15th and your payment is due on Feb 15th.

You make a payment on Feb 1st, since that is payday. You will be charged 16 days interest on the balance from Jan 15th, the rest of the payment will go to principal. (31 days in Jan)

You make a payment on Mar 1st. You will be charged 28 days interest on the balance from Feb 1st, the rest of the payment will go to principal. (28 days in Feb)

You get a tax refund and make an extra payment on Mar 10th. You will be charged 10 days interest on the balance from Mar 1st, the rest of the payment will go to principal.

Regardless of when you pay or pay extra, the due date on your loan does not change.

Play around with this?

Amortization Calculator

 

[fatBatman]

This is what I want to do. Do you make the additional payment through the app? How do you know all of it is applied to the principal?

Yes, I make it through the app. When making the extra payment manually, it says it is a principal payment and it is reflected as such on my statement the next month.

As others mentioned, time does play a part in this as well. Making the extra principal payment right after your last payment is better than right before since that is when the clock restarts on the interest accrual on the principal. This is the part that I meant being more difficult to explain in my last post and @BMCGC did a better job explaining that part than I did/could do.

 

[franksfords]

I pay my regular payment and additional towards principal. I try to add an addition 600 to 1000 a month. If you use the for app it allows you to put how much additional toward principal. I put over half my purchase price down so I hope with additional principal payments to have it paid off in a little over a year. Retirement in a little over two years. Want to go out without any payments if possible.

 

[js312]

This is both easy and difficult to explain/understand. What you are describing is "semi-monthly". This is often confused with "bi-weekly" and they are not the same.

With a bi-weekly payment schedule, you pay every two weeks. With 52 weeks in a year, this equates to 26 payments. For semi-monthly, you pay twice a month. With 12 months in a year, this comes to 24 payments a year. Think of it this way, every year is the same (52 weeks) but not every month is the same size (28-31 days). This explains the variation.

The bi-weekly schedule will pay off your loan faster since it would be the equivalent of making 1 extra payment per year. This would slow the growth of interest and you will pay off the loan faster. A semi-monthly payment will not change how the interest grows and will keep your loan on its original schedule.
Paying bi-weekly will decrease the life of your loan for your truck by a few months and is totally worth it if you can keep the discipline of payments. If your payment is $500/mo., it would probably be easier and would be better to make an extra $100 principal payment every month. This would equate to more than 2 extra payments per year and pay it off even sooner than bi-weekly since this extra amount goes directly against the principal and not interest.
Paying bi-weekly on a mortgage however, will make a huge 6-8 year difference in the life of the loan depending on your interest rate. Your mortgage holder would likely be happy to set up that payment plan on your normal auto-pay.

And yes, I use the Ford Credit app. My normal monthly payment is on auto-pay and I make an additional principal payment each month. For me, it's just easier.

I hope this helps.

On top of this, most people are probably paid bi-weekly with 26 pays per year, so paying a loan bi-weekly works out nicely.

My mortgage is bi-weekly and is about 13.5 years instead of 15 as a result. On a 30 year, I think it becomes somewhere between 24 and 25 years instead.

For the truck, I just round up to the next hundred dollar mark - which ends up being almost a full hundred - and make that a principle only payment.

 

[HammaMan]

Pay $1000 all at once. Half the regular payment half additional principal.

The loan is simple interest and interest accrues on a daily basis based on the principal.
The $500 reduction will result in a lower daily balance sooner than waiting 15 days to mak another payment.

Yes, best to pay more sooner to avoid the DAILY interest build.

There are early loan payoff calculators out there to tell you how much you'll save by doing such

 

[Zappy]

I pay weekly (Year of payments / 52) personally, but I also get weekly pay checks from work so it's easier for me to budget that way.

Been doing that for 2 decades and never had an issue. You just have to make the first full month payment then switch to weekly to not have issues.

 

[Mudflap]

This is what I want to do. Do you make the additional payment through the app? How do you know all of it is applied to the principal?

There is a "Principal" option you can select telling them it is a principal payment.

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