Debunking the Myth: Does Weekly or Fortnightly Repayments Really Pay off Your Loan Faster?

How do weekly repayments help you pay your loan off sooner? (Fortnightly works too!)

Quite simply, and a two fold effect:

1 – The sooner your money is paid into the loan the sooner it saves you interest as the interest is calculated on the daily outstanding balance – reduce the balance sooner and reduce the interest bill.

But more effectively

2 – The weekly repayment is most often calculated by taking the monthly repayment and dividing it by 4 and paid in weekly (or for fortnightly, by 2) which makes sense on the surface, however, there are not 4 weeks in a month (except February) so by the end of the year you will have paid a full month’s worth of additional repayments – without really feeling it.

As an example, lets say the monthly repayment should be an even $2,000, and we agree to pay $500 a week,

$2,000 x 12 months = $24,000 per year

but

$500 x 52 weeks = $26,000 per year - which is obviously more

Every dollar you pay over the interest or fee, comes off the balance of the loan

Of course you can save interest in exactly the same way by making monthly repayments but using your offset account for all of your income.

And if you are paid monthly, there’s no point at all in holding back money to pay weekly – pay the monthly repayment but consider adding a bit extra for the same effect.

On an average loan of, lets say $600,000 this represents just under 5 years saved off of the loan term and around $149,000 in interest avoided, all while being convenient to your pay cycle in most cases.

Imagine the power of adding just an extra $20, or $50, or $100 per repayment? Its motivating isn’t it!!