The Interest Savers

SAVING $ ,000’s ON YOUR LOAN

HOW TO SLASH THE TIME TAKEN TO PAY OFF YOUR LOAN
REDUCE YOUR INTEREST BILL BY HALF

CUTTING YEARS OFF THE TERM OF YOUR LOAN

You will be surprised at how easy it is to pay off your loan 5 or 10 years earlier than the traditional 25 years.
Cost conscious borrowers have paid off their 25 years loan in just 7 or 10 years by:

* making higher payments than they were contracted to make.

* using any ‘spare’ cash they have to pay off their loan and reduce the balance owing.

Whenever interest rates have fallen and their lender has invited them to make lower repayments they have continued to
make the higher repayments. This has resulted in the balance owing being reduced more quickly.

Whenever interest rates have risen and their lender has invited them to continue making the same repayments and extend
the term of the loan (e.g. increase the term by 2 or 3 years) they have elected to make higher repayments to cover the cost
of the higher interest rate. This has resulted in the balance owing not being increased.

Note: The following examples have been calculated using ‘The Home Loan Buster – 2002’ which is different to most other forecasters because it calculates on a daily basis and takes leap years into consideration. Other forecasters do not allow for leap years and treat all months as having the same number of days (which we know is not correct, e.g. February = 28 days
and 29 days in leap years … January = 31 days).

EXAMPLE 1. Monthly Fortnightly Weekly
Repayments Repayments* Repayments**
Loan Amount: $100,000 $100,000 $100,000

Interest Rate: 6% 6% 6%

Term of Loan: 25 years 21 years 21 years

Frequency of Repayments: monthly fortnightly weekly

Repayments: 300 X $644 . 30 546 X $322 . 15 1092 X $161 . 08

Total Interest Paid: $ 93,294 . 65 $ 75,252 . 94 $ 75,047 . 72

Total Repayments: $193,294 . 65 $175,252 . 94 $175,047 . 72

SAVING over Monthly: - $ 18,041 . 71 $ 18,246 . 93

Pay off Loan Early by: - 48 months 48 months

* In the case of fortnightly repayments it is advisable to divide the normal monthly repayments by 2 to calculate the fortnightly repayments. Because there are 26 fortnights in a year it means that the borrower actually makes 2 extra
fortnightly payments each year, resulting in the loan being paid out 48 months early and savings of $ 18,041 . 71.

** In the case of weekly repayments it is advisable to divide the normal monthly repayments by 4 to calculate the weekly repayments. Because there are 52 weeks in a year it means that the borrower actually makes 4 extra
weekly payments each year, resulting in the loan being paid out 48 months early and savings of $ 18,246 . 93.

Note that the saving from making weekly repayments versus fortnightly repayments is insignificant :
$ 18,246 . 93 (weekly) minus $ 18,041 . 71 (fortnightly) equals $ 205 . 22.

EXAMPLE 1 : Traditional Repayments

MONTHLY REPAYMENTS: 300 X $644.30

FORTNIGHTLY REPAYMENTS: 545 X $322.15

WEEKLY REPAYMENTS: 1087 X $161.08

EXAMPLE 2. Pay an extra $20 per month ( $5 per week ).

Monthly	Fortnightly	Weekly
	Repayments	Repayments*	Repayments**

Loan Amount:	$100,000	$100,000	$100,000

Interest Rate:	6%	6%	6%

Term of Loan:	23 yrs / 4mths	19 yrs / 10.5mths	19 yrs / 10.2mths

Frequency of Repayments:	monthly	fortnightly	weekly

Repayments:	280 X $664 . 30	504 X $332 . 15	998 X $166 . 08

Total Interest Paid:	$ 86,078 . 38	$ 70,253 . 41	$ 70,062 . 73

Total Repayments:	$186,078 . 38	$170,253 . 41	$170,062 . 73

Traditional Total Repayments:	$193,294 . 65 ( i.e. normal monthly repayments – see Example 1 )

SAVING over Traditional :	$ 7,216 . 27	$ 23,041 . 24	$ 23,231 . 92

Pay off Loan Early by:	20 months	62 months	62 months

By paying an extra $5 per week a borrower can save over $23,000 in interest and pay out their loan 5 years early.
( i.e. not even the cost of a packet of cigarettes or 2 beers ).

* In the case of fortnightly repayments it is advisable to divide the normal monthly repayments by 2 to calculate the fortnightly repayments. Because there are 26 fortnights in a year it means that the borrower actually makes 2 extra
fortnightly payments each year, resulting in the loan being paid out 48 months early and savings of $ 23,041 . 24.

** In the case of weekly repayments it is advisable to divide the normal monthly repayments by 4 to calculate the weekly repayments. Because there are 52 weeks in a year it means that the borrower actually makes 4 extra
weekly payments each year, resulting in the loan being paid out 48 months early and savings of $ 23,231 . 92.

Note that the saving from making weekly repayments versus fortnightly repayments is insignificant :
$ 23,231 . 92 (weekly) minus $ 23,041 . 24 (fortnightly) equals $ 190 . 68.

EXAMPLE 2 : Extra $20 per Month

MONTHLY REPAYMENTS: 281 X $664.30

FORTNIGHTLY REPAYMENTS: 513 X $332.15

WEEKLY REPAYMENTS: 1024 X $166.08

EXAMPLE 3. Pay an extra $100 per month ( $25 per week ).

Monthly	Fortnightly		Weekly
	Repayments		Repayments*	Repayments**

Loan Amount:	$100,000		$100,000	$100,000

Interest Rate:	6%		6%	6%

Term of Loan:	18 yrs / 7mths		16 yrs / 2mths	16 yrs / 1.75mths

Frequency of Repayments:	monthly		fortnightly	weekly

Repayments:	223 X $744 . 30		424 X $372 . 15	839 X $186 . 08

Total Interest Paid:	$ 66,254 . 66		$ 55,746 . 39	$ 55,593 . 56

Total Repayments:	$166,254 . 66		$155,746 . 39	$155,593 . 56

Traditional Total Repayments:	$193,294 . 65 ( i.e. normal monthly repayments – see Example 1 )

SAVING over Traditional:	$ 27,039 . 99	$ 37, 548 . 26		$ 37,701 . 57
Pay off Loan Early by:	77 months	106 months		106 months

paying an extra $25 per week borrowers can save over $37,000 in interest and pay out their loan 9 years early.
(i.e. the cost of 2 1/2 packets of cigarettes or 2 bottles of wine ).

* In the case of fortnightly repayments it is advisable to divide the normal monthly repayments by 2 to calculate the fortnightly repayments. Because there are 26 fortnights in a year it means that the borrower actually makes 2 extra
fortnightly payments each year, resulting in the loan being paid out 106 months early and savings of $ 37,548 . 26.

** In the case of weekly repayments it is advisable to divide the normal monthly repayments by 4 to calculate the weekly repayments. Because there are 52 weeks in a year it means that the borrower actually makes 4 extra
weekly payments each year, resulting in the loan being paid out 48 months early and savings of $ 37,701 . 57.

Note that the savings of making weekly repayments versus fortnightly repayments is insignificant :
$ 37,701 . 57 (weekly) minus $ 37,548 . 26 (fortnightly) equals $ 153 . 31.

EXAMPLE 3: Extra $100 per Month

MONTHLY REPAYMENTS: 224 X $744.30

FORTNIGHTLY REPAYMENTS: 419 X $372.15

WEEKLY REPAYMENTS: 837 X $186.08