“Apply to principle” are the three most important words to help you payoff your debts quicker. Adding those three little words to your extra payments makes all of the difference in the world.
“Apply to principle” means just what it looks like. When you add those words to your extra debt payments, you are telling the company that is processing your extra payments that you want this payment to paydown principle, not next months payment.
What happens you don’t add “apply to principle” to your debt payments, is that the payment will typically be applied towards next months payment.
No “Apply to Principle” Example
- You owe $6,000 on your car with a payment of $500 per month.
- You send two checks. One for the $500 payment and one for $500 without “apply to principle” in the memo line.
The result of this example is that you won’t have to make a payment next month. What you want to happen is this:
“Apply to Principle” Example
- You owe $6,000 on your car with a payment of $500 per month.
- You send two checks. One for the $500 payment and one for $500 with “apply to principle” in the memo line.
The result of this example is that you will have reduced your principle balance by $500, which means that you will pay less interest in the long run.
You will need to check with your loan servicer to ensure that early payments are allowed and that you will not be penalized for paying early.
