Newbie: Need Advice

[Kell32]

I have been lurking here for a few weeks and finally decided to join and get some advice. I have several consolidated students loans totaling a little more than $14,000. I was reveiwing my payment history over the weekend and noticed money in excess of my minimum payment is not always being applied to my principal. I called a representative and he stated that if I wanted all of any excess payment to apply to principal I needed to make a separte payment on the same day as my due date; otherwise the excess payment would first apply to interest. I am consolidates with SallieMae . Please advise if this is the most effective way to pay down the principal. Thanks in advance.

[Bob B.]

Yes, that is correct. When you have accumulated interest, any payment you make will go toward interest first, and principal second. Interest is calculated and accumulated every day on most any loan. So, day one after a payment is made, a small amount of interest is accumulated on your loan. Day two, a little bit more, and so on, until day 30 (or day 31 or 28 depending on the month), your entire month's interest is accumulated. So, depending on which day of the monthly loan period you pay ahead on your loan, a varying amount of accumulated interest will be paid first, unless you make your extra payment on the first day of the monthly loan period.

[Singuy]

I think someone can check my math but I don't think it matters at the end since interest and principle both have interest tacked on. At the end of the day, everything is consolidated to a new amount that is the new principle (interest plus original principle). It's not like your interest is not being charged an interest rate, and only the principle is being charged.

[Kell32]

Bob B., thanks for explaining the daily intereset accuring to me. I thought I was doing a good job by making extra payments here and there to pay down the debt. Now, I will make sure to send all the extra money in a separate payment on the due date.

Singuy, I thought the same thing but I looked back at payment history and SALLIEMAE is not thinking the way you and I thought in regards to interest.


Thanks for replying and helping me better understand.