The Power of Extra Loan Payments

- - Getting out of debt

This week I wanted to talk about something that has become one of those things people say their doing, but really aren’t: making extra payments on your loans. 

In my experience, I have heard a lot of people talk about how they are making extra payments on their loans but then when it comes down to it, they really just rounded up a few bucks to the next ten. Alright yes, it’s better than nothing, but it isn’t going to get you very far.  I am also guilty of this exact thing. A few years ago, the minimum payment on my one loan was $267.

How much was I paying when I said I was making extra payments? $270. Yes, I’m serious.

In my August debt report, I shared that I had paid of $7k in just the previous five months. This is a huge milestone, and it’s something I never expected. Yes, I was the one who created my debt payoff plan and I knew I would be paying them down very rapidly. But actually seeing the amount of my debt decrease so quickly makes me realize how stupid I’ve been for the past 5 years.

When I got my first bill from this student loan company, the minimum payment was $267. I started paying $300 each month, and I was so proud of myself. I thought I was making a big difference in my debt. But in reality, it wasn’t helping as much as I had thought.

Here is a chart that shows my decrease in debt over the last five years.
Student Loan Extra Payments
Yes, it was going down but the amount was so minimal. Every time I made a payment of $300, $165 dollars went to principal and the rest would go to interest. That means my total debt would only go down $165 a month. So, my balance would go down $1980 each year. At that rate, I would have been paying off this loan for more than 25 years!

I don’t know how I didn’t see this before. I’m just glad I know now and can mention it to all of you. Make sure you really look into how long you will be paying off your loans.

Since I realized the real length of my payoff, I have been putting every $5 I can towards my loans.


The first 4 years of my loan payoff went like this:

Total Paid: $13,244
Total the balance decreased: $6,463.34
Percent of payments that went to Principal: 48.8%

That means that $6,780 was wasted. When you’re making less than $30-$40k a year, this amount is a huge percentage of your income. Doesn’t this make you second guess your payoff strategy?


Since March, I have been making extra payments and allocating every dollar I make by using a budget. This allows me to make large payments of whatever is left over after the bills are paid. Previously, I would just let that extra money sit there in my checking account, or put a little in savings, or go shopping.


This is what my payoff looks like for the last 5-6 months:

Total Paid: $7,294
Total the balance decreased: $6,372.65
Percent of payments that went to Principal: 87%

Making extra payments like this means I can get ahead of a lot of the interest that would have accrued. My balance has gone down almost the same amount in the last 6 months than it did during the first 4 years of repayment. That has got to resonate with some of you.


Where does that leave me?

Extra payments are important for a reason. It’s hard to understand that when people just run around telling you to make extra payments. I was the same way. I heard it was a good idea but I wasn’t really listening. I didn’t ever look into it for myself and see what the big hype was about.

I wrote this post to give you a real life example of how much of a difference a few extra dollars can make. You don’t have to take it to the extreme I am, but even an extra $100 a month can go a long way.

I challenge you to run the numbers for your own situation. How long will you really be in debt? If you don’t look into this, you’ll never really know when you’ll be able to start “stealthily” saving for retirement, a house, or being able to travel? When will you really be able to prepare yourself to be financially prepared for an emergency? Think about it. Student loans are tying up all of the money you could use for your future goals. You won’t be able to have a truly strong financial foundation until they are out of your life.


Why This is Important

To put this into perspective, there have been many articles lately about some of the elderly having their social security checks garnished for student loan payments because they weren’t ever able to get rid of them. 75 years old and still running from creditors. Can you imagine?

Life should not be about running from creditors and loan companies. See where you can buckle down and pay some extra towards your loans. Make sure when you do pay more than the minimum payments, that you are calling the loan companies to make sure they are applying the extra payments towards principal and not future interest. Here is a post I had written about this exact thing.

Leave a comment below and let me know one simple way you are planning to lower your expenses so you can put just a little more towards your loans. I’ll start…. (in the comments section)

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I am Chenell Tull and so far, I've had a pretty rough time with my student loan debt. Recently, I've figured out a more productive "get out of debt" plan and the goal is to pay off over $60k in just 36 months. If you want to learn more, subscribe to the mailing list and get FREE updates on my successes and failures on this journey out of debt.