This is a common question. In a nutshell, more frequent payments make less of an impact than making extra or larger payments … Here’s why:

1. You still owe the same amount of money.
2. Unless you’re paying more than required at each payment, the loan isn’t repaid any faster.
3. Payment frequency (weekly, bi-weekly, semi-monthly or monthly) should be chosen based on the easiest for you to organize with your cash flow.

*Usually when a lender asks if you want to pay down your loan or mortgage more quickly, they suggest more frequent payments. While this can make a difference with a large amount of money and over a very long period of time, the sure-fire way to make a difference is to make larger than required payments – even if it’s only $50 or $100 extra per month.

*Typically a lender takes the total annual payments, divides by 24 and suggests you pay this amount bi-weekly which means that you pay 26 payments rather than 24. It’s a forced way of paying more than you’re required to pay.

Optimally you would pay on a convenient schedule and increase the payments by a small amount to make a big difference. The difference in the interest you pay and how long you make payments for can be huge! This means more money in your pocket (rather than paying interest) and you free up cash flow sooner by completing your payments faster.