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Originally Posted by AmyKay
My husband and I met with my rep at KAP Financial tonight. I do think there's more to it than just paying extra toward the principal. The key point is that all your money sits in the account, which lowers your interest rate. Our paychecks will get deposited directly into the account. We'll pay all our monthly bills on an American Express, and pay it off at the end of each month from that same big account. That way, the money sits there all month, lowering our interest rate. The less we spend each month, the more we save, the more stays in that account which lowers our interest.
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It doesn't lower your interest rate. It lowers the balance on which interest accrues. Until you write a check to pay your bills, then the balance goes back up. I would only recommend this type of loan to someone that is extremely disciplined about their spending.
Quote:
Originally Posted by AmyKay
It is complicated. But it made a lot of sense to my husband. I think we're going to do it. If it's a disaster, we can refinance back to a traditional loan anytime we want. I think the video presentation on KapFinancial dot com's website explains it well.
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Keep in mind that refinancing is expensive. You don't want to do it too often.