Millions of Americans have found their way into debt by purchasing on credit leading them to become inevitably a runner on the payment treadmill, making minimum payments to different lenders, only to find themselves making payments every month and “running in place”. Well, I can think of a few different ways to get my exercise in; wouldn’t you agree?
This is the 3rd article on this blog regarding loan acceleration and how its mechanism works in accomplishing “actual movement” on the “payment treadmill”. Since this post will be more detailed, if this is the first you’ve heard of this topic, I suggest you read the two previous postings. I will be reviewing the basics so if you’re here, intrigued and want to give it a go, read on…..
As its name suggests, loan acceleration not only gets you moving, it allows you reach the end of a loan faster than the anticipated term without much effort and is a tremendous tool to keep you disciplined and get out of debt AND sooner, thus increasing your FUTURE WEALTH. These two words: future and wealth are not even someone in a debt spiral thinks of, because if you’re in that position, you’re probably overwhelmed, frustrated and can’t see past just making the next payment.
Having personally worked in the finance and credit industry since 1987, it amazes me to see that only within the last few years is loan acceleration being rediscovered and utilized.
Loan acceleration companies have been around for decades! When loan acceleration first became readily available back in the mid 80’s, the concept was so far ahead of its time that as anything else not understood, it became a concept most people were afraid to use. Today however, it’s certainly evident as millions of people are using it is becoming increasingly popular, especially with all the economic earth quakes we’ve gone through, forcing many to seeking solid ground and truly think more about the security of their futures.
So, what is loan acceleration and how does it work? Loan acceleration is a strategy that combines two components to demolish your debts years earlier which replaces long-term debt with a significant reduction in interest payments and future wealth! In simplest terms it saves you big time money in interest by getting you to the end of a loan faster! Since term is a big factor in the calculation of the total interest you’d pay on a loan, if you finish a loan before the predetermined term, you save interest as the lender has received the money they lent you before the time expected.
Let’s use an auto loan as an example: (typical auto loan terms are 72 months and today, it is not a rarity to see auto loans for 84 months as people extend the term to make the monthly payment more affordable.)
You purchase your dream car and finance $40,000 (hmmm, must be a nice car), since you can’t afford the monthly payments at 72 months, you extend the term to 84 months (at 6% apr). Now your payment is $585. Let’s add this up shall we? 84 months x $585 payment = $49,140, since you financed (borrowed) $40,000 that means you will have paid $9,140 in interest assuming you make your monthly $585 payment like a good little soldier for 84 months at which time the loan is paid off and your balance is zero.
With loan acceleration, your payment of $585 is divided in half and debited from your bank account b the loan acceleration company on a bi-weekly basis. So instead of paying one big payment per month, your account will be debited bi-weekly for $292.50 (easier to budget). Sounds like the same thing right? Wrong! See, there are 2 months in a year that have three biweekly periods in them, so in actuality you’re making 13 payments a year instead of 12 which speeds up (accelerates) the loan.
Keep in mind this acceleration can lead to even more savings when you add a little extra to the payment, say just $25 more (per bi-weekly debit). As illustrated in the below picture, you will see the three scenarios:
1) Traditional monthly payment at 84 months (yuck) 2) Without paying anything additional towards your payment, using loan acceleration, you’d save almost $600 in actual interest being that you’re paying off the loan 4 months before schedule and gain $almost $3000 in future wealth (calculated by the savings for the months you no longer have to make PLUS the actual interest saved). 3) If you added only $25 more to each debit, you’d pay the loan off 13 MONTHS earlier (over a year), you’d save almost $1400 in actual interest and gain a future wealth of over $7000! (remember the year of no payments plus the interest savings!)
Loan acceleration is a fantastic tool to get out of any kind of debt, but especially when you find yourself in debt with several credit cards and you’re making payments to all of them, but the balances are still running high. You can combine all your debt, credit cards, mortgage and auto loans.
With a good loan acceleration company (services and practices vary just like all competitors do in any other industry) your ENTIRE debt load is combined and the monthly payments are converted to bi-weekly debits (divided in half). Loans are ranked by the highest interest rate and balance. Once your first debt has been paid off that “payment” is applied to the next loan as extra principal payments accelerating the loan even faster!
This cycle repeats, now adding the payment portion of the two paid off loans to the next loan. As each loan gets paid off the payments snowball as more is getting applied to the next loan from the payment portions of the paid off loans.
This cycle continues to repeat itself and the snowballing effect accelerates and pays off ALL your debt load one loan at a time. No more headaches and budgeting tricks. This is all accomplished by simply having your existing payments divided by half and debited bi-weekly from your bank account.
Imagine being able to pay off a debt load of 30 years in less than 12 and a half years! That’s incredible and a critical factor in anyone’s future stability and a much better quality of life.
Accelerating all your loans (in this example a typical household with an auto loan, mortgage and a couple of credit cards) to less than half the time than originally expected to take would result in savings of over $96,000 in just interest savings!
Ok, so you saved over $96,000 sounds awesome right? Ooops! Wait, what about all the money of the payments that you no longer need to make on the time saved of 17 and half years! Hmmm, woah how much money could that be?
Math is not a force than can be reckoned with. If more people took the time to add their debt and see what it REALLY costs them to just make their “monthly” payments, they would be insane after getting the facts, to not have their debts on an accelerated pay plan. One last question, I’m sure you’re curious of?
What’s the cost of these savings? I can tell you they vary from company to company and to get enrolled with one you need to locate an agent. As the president of the Ez Credit Repair Now, I offer this accelerated program to my clients as getting credit restored is only part of the big picture. Many people are referred to us for financial and budgeting assistance. We’re an agent for the longest running loan acceleration company in the US with a AAA better business bureau rating for the last 13 years! Their administrator (the actual entity that handles the debits and payments to lenders) have been in business since 1989 and have an outstanding reputation. There is no out-of-pocket costs or fees. A lifetime membership is only $799 which is collected from within the debits and you can include all your existing and FUTURE loans in your household!
This is a topic that deserves your time in researching on it as it will single-handedly change your life, not only with the savings and stability it provides, but the improved quality of life you’ll enjoy with the enormous savings and peace of mind of having someone else handle all the work!
Hope this post helps! Best of luck!
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