Should I put my extra money towards paying off the principal on my
loan?
Q.
If I pay extra on a loan each month, either mortgage or
personal, will the bank or lending institution automatically put
that extra amount toward the principal or do I need to specify? Is
it correct that the extra I pay should go to the principal?
A.
If you have a normal loan, the bank simply debits the interest
to your bank account each month - any deposits made into the loan
that are in excess of the interest charged, would automatically
reduce the principal. With certain kinds of personal loans, the
interest calculations are different so make sure you talk to your
lender before making extra payments on personal loans.
Each week financial advisor Noel Whittaker answers your
questions.
