Generally, yes. You can design your own debt repayment schedule simply by paying more than the required monthly payment. For example, you might decide to repay a home equity loan over three to five years rather than a bank’s 15- or 20-year schedule. Simply use a loan amortization table to determine the monthly payment necessary for the reduced time period.
Another “do-it-yourself” loan is a biweekly mortgage. Simply divide your monthly mortgage payment (the principal and interest portion only) by 12, and add that amount to each monthly payment. This has the same effect as a biweekly mortgage (i.e., making 26 payments per year). Whenever you prepay a loan, be sure to include a brief note directing the lender to apply the excess payment toward the outstanding principal.
We would like your feedback on this Personal Finance Frequently Asked Question.
