Many people know programs in which their bank offers biweekly payments instead of monthly payments for mortgages or other loans. This option usually sounds attractive since it saves the borrower money and makes the loan pay faster. Understanding how to calculate payments and how it works is simple.
Use a biweekly calculator online (see Resources) or do it yourself. The amount of biweekly payments is exactly half of your current monthly payment or what your monthly payment would be if you still do not have the loan.
Pay every week. You can do this by yourself or set up a program with your bank. The reason why this makes a difference is because there are 52 weeks in a year and only 12 months. Even though biweekly payments are divided in two, you are paying half the amount 26 times instead of making the full payment 12 times. These amounts plus a monthly amount each year.
Calculate your savings. Since you are paying more each year, you will end up paying your loan more quickly. If an interest was not involved, you would only end up paying your mortgage or loan more quickly by subtracting one month every two extra biweekly payments each year. Compound interest, anyway, will add to the amount of savings since you’ll be paying premium more quickly, so there will be less interest. Doing the calculations by hand is difficult, so use an online calculator (Look Resources) to see how much you’ll save.