Certain types of loans, such as mortgages, have the option of contributing extra amount of money per month in installments, so you can pay capital to your loan. This action is very convenient, because it gives a series of advantages that you will end up thanking for having done, but it can also be very complicated at the moment.
For the reasons detailed above, it is necessary to know how to identify when the time is right to make this payment. In relation to a study about your current, future economic situation and dreams / perspectives that you have in the short or long term.
Time x interests
The two factors that are put into balance when you have a long-term loan and you are considering paying capital are: the time and interest of the loan.
In terms of time, you have an advantage, we could be talking about a couple of years or more than a decade. Since the term is so long, it helps you to reduce the monthly payments you pay, which would be huge with a loan that you must repay in a few months. The time could even make the sum you owe, be less significant than it was at the beginning.
Even so, many people find the idea of paying capital to their loan appealing. It turns out that that can significantly reduce the time you spend to pay and the total money you end up returning to your lender. Well, it is well known that, especially in the first installments you pay, little is contributed to the capital and much to the interest, which is why the next month you still have interests in almost the same magnitude.
With just one month, where you pay an extra amount similar to the one you touch on that occasion, you will decrease the amount of interest for the next month and pay more capital. In the end you could avoid a little more monthly payments.
Personal plans vs. pay your loan capital
The biggest inconvenience that can arise when those who pay capital to your loan is that, having the money available, you do not decide to do it, because you know you have other cats. Can not you decide? Take into account the different scenarios that may arise:
- You have other debts to pay: it is a common case, not only you must cancel that loan but you have to cancel money to other individuals or entities. When there are immediate debts, in the short term, do not hesitate and leave it first, there will be an opportunity for the loan.
- You have not paid anything to your credit card: If you have a credit card and you have not even paid the minimum amount, do not leave it for later. You will keep your card available to use it. Paying capital to your loan is not a priority when you have other commitments.
- You do not have savings: if you do not have anything saved for any unforeseen event, instead of paying capital, save it, you never know at what moment it can be useful.
Be clear that you can not pay all the debts at the same time, one, then another.