Make one extra payment a year
For some borrowers, the monthly budget is already stretched thin. Instead of increasing each monthly payment, a lump sum payment equivalent to one regular monthly payment per year can have a similarly positive effect. This may be ideal for borrowers who receive a tax refund or annual bonus once per year. For example, the same 25-year loan of $250,000 with interest at 3.75% would keep the lower monthly payment of $1,285.33. By paying one extra payment of $1,285.33 each year, a loan amortization schedule with extra payments shows that you would repay the loan 2 years and 11 months earlier and save $17,381.35 in interest.