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Minnesota | I'm sorry but I'm going to disagree with you and side with realityspeaks. Unless you continue to pay earlier every single year, there is minimal savings. Do a simulation of someone paying the note every december as it was written. Then do a simulation of someone paying the note every september and there will only be the initial 4 months savings plus a little bit of interest. Think of it this way. Once you make the first payment in september, that is your initial savings but now you are still making your payment every 12 months just like the guy who's paying in december is. The balance is virtually the same after year one, the only difference will be a few hundred/thousand or so dollars that was applied to early principle on the guy who payed in september. That small amount of money in the compound interest difference after 20-30 years is really irrelevant in the grand scheme of things. Think of it this way. 100,000 note at 6% interest is 500/month in interest the first month and then slightly increasing every month til the first payment is made. for simple math lets only use 500. One guy pays in september so he saved 2000 in interest which was applied to principle instead assuming the institution let him make the full payment. so at the end of year one the guy who paid in september has a balance on principle that would be 2000 less than the guy who pays in december but the clock is already ticking 4 months of interest on the guy who paid in september. Unless he continually pays earlier every single year, there is no more savings other than whatever the initial 2000 at 6% interest adds up to. If you want to stop compound interest the quickest, the best way to do it is to continually make additional early principle payments. | |
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Farm Loan Payment Early
