SMART Payment Plan, a financial tech payment company, is shedding light on one of the most powerful ways to shorten payment lifespan, decrease finance charges, improve your budgeting, and enhance your cash flow. What’s the secret? Smaller, more consistent payments.
A payment plan that matches your pay schedule, especially if you get paid weekly or bi-weekly, can help you more quickly pay off your student loans, mortgages, credit cards, and virtually any other debt you might be carrying around. Even more, you could potentially save tens of thousands of dollars by opting for a paycheck-matching payment plan for your mortgage, and pay it off nearly eight years early. By opting for smaller, more frequent payment plans, SMART Payment Plan says its customers have consistently been able to retire up to 10 years earlier than they had originally planned.
How does it work?
As a financial technology company that specializes in automated customer payments, SMART matches smaller, lower payments with their customer’s individual paydays. For example, if a customer gets paid biweekly, they could set up their plan to pay smaller increments every two weeks. By paying twice each month, rather than once monthly, customers split the monthly cost of their bill in half. They only pay 50 percent of the monthly total, two weeks each month.
By doing so, such customers actually pay an additional payment every single year. Two payments each month equates to 26 partial payments yearly. These 26 payments are equal to 13 complete, traditional payments, rather than the typical 12. But no matter what their pay schedule, SMART says that by matching payments with paychecks and dividing larger payments into smaller ones, customers can see incredible financial benefits.
When your lower payment system coincides with your paychecks, you can more easily budget for your mortgage or credit card payments, as well as your other bills, like groceries, student loans, Internet, and cable. Many Americans live paycheck to paycheck, meaning a payment system that matches their income deposits won’t leave their checking account empty mid-month. It will reduce the burden and the worry of having enough to pay off each payment, giving you more peace of mind every billing cycle.
In addition to added peace of mind, paycheck-matching customers enjoy a variety of other serious advantages. SMART Payment Plan elaborates, and shares some of the biggest advantages to switching to smaller, more frequent payment plans.
Could you choose a paycheck-matching payment plan and enjoy…
Improved credit? Bankrate suggests that biweekly payments, for example, could actually improve your credit. While there is no hard evidence to say this is absolutely true, it can certainly help you keep track of your payments and ensure they are consistently made. This automated payment approach will automatically withdraw money from your account. It ensures that your payments are always made on time, which can help to support your overall credit. This is especially important for those who have missed payments because they simply forgot to write a check. Customers can avoid innocent mistakes that come with big consequences, and rest easy, knowing their bills are always paid.
Reduced interest? When you took out your mortgage loan, you probably agreed to an attached interest rate. This might seem fairly small, unless you look at how much the interest adds up over the entire course of your loan. For example, a 6 percent interest on a 30-year $250,000 fixed-rate mortgage means that you will pay more than $64,000 in interest by the end of the loan’s life. However, smaller, more frequent payment plans help you pay off your loan faster, and reduce the interest by chipping away at the amount of your principal more rapidly.
As an example, if a customer has a biweekly paycheck, they should choose a biweekly payment plan. If they do, this particular mortgage could see a reduced principal of over $9,000 in just five years. But no matter your individual pay schedule, SMART says that if your payments are smaller, but more frequent, you can still see big benefits.
More home equity? Another advantage of a paycheck-matching payment plan is that you could reduce the grand total of your principal amount, as well as increase your home’s equity. Essentially, you could own more of your house in five years than you would be able to through traditional monthly payments. While this looks great on paper, knowing you own more of your home feels great, too.
Convenience? An inherent result of lowering your principal faster, as well as saving on interest, is owning your home more quickly. As stated, you could even own your home up to eight years earlier than you would be able to with traditional payment plans.
In addition, with paycheck-matching payments, it is typically easier to pay smaller automatically withdrawn amounts with every paycheck. This avoids the need to devote the majority of one paycheck to your mortgage and remember to write and mail checks every month.
Should you set up a paycheck-matching plan on your own?
Automated payment providers like SMART Payment Plan make it easy for homeowners to pay down their mortgages faster. However, some people prefer to do this themselves, rather than go through an outside company. While this might seem like a good idea, Citibank warns against trying to set up such a payment schedule on your own.
“Some homeowners try to make extra principal payments themselves,” reported the banking giant. “Most, however, aren’t able to keep a consistent schedule.”
Homeowners would have to manually set aside money every month, which means life can get in the way, and payments could be forgotten. Rather than chancing it, consider going through a reputable automated service. It ensures that your payments will always be made on time, and the work is done for you.
When considering your options on paying down your debt, SMART Payment Plan urges homeowners to consider smaller, more frequent paycheck-matching payment plans to help improve their budgeting, pay down their loans faster, and even retire 10 full years before they ever thought they could.