Should I make partial pre-payments on an actuarial loan?
The contract is not very clear. As much as I can understand it will still help if you make part prepayments. In an Rule 78 or Actuarial method, the schedule is drawn up front and the break-up of interest and principal for each month is calculated ahead. At the beginning both the reducing balance method as well as Actuarial method will give the same schedule.  However in Actuarial method, if you make part prepayments, they get applied to the future principals, the interest are ignored. However the future interests are not reduced. Example: Say your schedule looks something like this; Monthly Payments say 100; Month | Principal | Interest 1 | 10 | 90 2 | 20 | 80 3 | 30 | 70 4 | 40 | 60 5 | 50 | 50 6 | 60 | 40 7 | 70 | 30 8 | 80 | 20 9 | 90 | 10 So lets say you have made 3 payments of 100, in the 4th month if you make 150 [in addition to 100], it would get applied to the principal of 4th, 5th and 6th month. So essentially you would save interest of 4th, 5th and 5th month. It would also reduce the total payments to 6. i.e. you will only have 7th, 8th, 9th due. The next payment you make of 100 will get applied to row 7. The disadvantage of this method over reducing balance is that the interest calculated for rows 7,8,9 don't change compared to reducing balance. However if you prepay in full, the unearned interest is calculated and returned as per the Actuarial Tables.
It looks like the rate on that first loan is 6-2/3%?  When I look at $72000 principal and a $500 payment, I'm seeing a long term, 24 years. Not 60, but not good either.  Yes, as you pay a bit of principal, the next payment has less interest and even more principal.  I hope your degree is in a field that's lucrative. Or that you're able to get a job that qualifies you for loan forgiveness over time. I'm sorry that advice might seem weak, but aside from that, the best I can offer is to live well beneath your means, i.e. continue to live like a student, and make additional payments.  As far as bi-weekly goes, the lender may not accept partial payments. Set aside the money every two weeks and when you have extra money just make an extra payment amount toward principal.  To pay this off as fast as possible, I'd make as high an extra payment as I could each month to the loan with the higher rate. If the rates are the same, pay it off to the one with the lower balance.  With respect to the debt snowballers, followers of The David, say the rates are simply close, say .25% apart, with the lower balance having the lower rate. If you were to pay this one first, it would occur sooner, of course, and free up that monthly payment, helping your cash flow. But, it comes at a cost.  Note - if, as Noah suggests, the rates are the same, I'd advise to make all extra payments toward the lower balance. That will get you to the point where you've freed up that cash flow for other purposes, whether it's to focus on the higher loan, or anything else you need this for. "You'd have to check the terms of your contract. On most installment loans, I think, they calculate interest monthly, not daily. That is, if you make 3 payments of $96 over the course of the month instead of one payment of $288 at the end of the month (but before the due date), it makes absolutely zero difference to their interest calculation. They just total up your payments for the month. That's how my mortgage works and how some past loans I've had worked. All you'd accomplish is to cost yourself some time, postage if you're mailing payments, and waste the bank's time processing multiple payments. If the loan allows you to make pre-payments -- which I think most loans today do -- then what DOES work is to make an extra payment or an overpayment. If you have a few hundred extra dollars, make an extra payment. This reduces your principle and reduces the amount of interest you pay every month for the remainder of the loan. And if you're paying $1 less in interest, then that extra dollar goes against principle, which further reduces the amount you pay in interest the next month. This snowballs and can save you a lot in the long run. Better still, instead of paying $288 each month, pay, say, $300. Then every month you're nibbling away at the principle faster and faster. For example, I calculate that if you're paying $288 per month, you'll pay the loan off in 72 months and pay a total of $6062 in interest. Pay $300 per month and you'll pay it off in 67 months with a total of $6031 interest. Okay, not a huge deal. Pay $350 per month and you pay it off in 55 months with $5449 interest. (I just did quick calculations with a spreadsheet, not accurate to the penny, but close enough for comparison.) PS This is different from ""revolving credit"", like credit cards, where interest is calculated on the ""average daily balance"". With a credit card, making multiple payments would indeed reduce your interest. But not by much. If you pay $100 every 10 days instead of $300 at the end, then you're saving the interest on 20 days x $100 + 10 days x $100, so 12.5% = 0.03% per day, so 0.03% x ($2000+$1000) = 90 cents. If you're mailing your payments, the postage is 49 cents x 2 extra payments = 98 cents. You're losing 8 cents per month by doing this." Assuming that partial payments are held (without interest) until enough money has accumulated to make at least a full payment, and assuming that overpayments are applied toward principal, a strategy of making three $ 96.00 payments per month will shorten your amortization period by less than one month.  These calculations assume that the interest rate is 12.5 percent APR, compounded monthly (with an APY of 13.2416 percent). Instead of 71 payments of $ 285.56 plus a final payment of $ 285.38, you would make the equivalent of 71 payments of $ 288.00 plus a final payment of $ 28.10. If you make one $ 96.00 payment every ten days, you will make an average of 36.5… partial payments per year, instead of 36 partial payments per year.  This will speed up your loan amortization by about another month-and-a-half over the course of the 72 month loan.  One month of shortening is due to the extra principal payments, and the other half-month is due to interest savings.   To a second approximation, this strategy is similar to paying $ 292.00 per month for 69 months plus a final payment of $ 195.38.  In other words, this strategy will probably involve about 212 payments of $ 96.00 each, possibly with a small 213th payment. I'm glad you didn't say they were the only causes of the bubble, and I hope you didn't mean to.  But I won't argue that those were not partially to blame.  I also won't say I personally was not partially to blame.  Now, I certainly don't want to defend the banks, at least not a lot of them, but I disagree with some of your assertions. For one thing, they are getting blamed for making loans to readily available, and now they are being blamed (not by you) for **not** making the money readily available.    Have you financed any homes?  If so, did you just go to a bank and get a loan?  I'm sure some people do that, but I don't know anyone who ever has.  I go to a loan agent, and get a much cheaper loan.  And I think part of the problem is that many of these agents have only one overriding objective - to enable you to qualify for a loan, so they can get their commission.  They know all the rules and reasons people get turned down, so they play the system and get people loans who should not get them.  I don't really think the banks are blameless, as they allow this, and in many cases, know about it (unofficially).  But I don't think it's a conspiracy by the banks; I think the banks were simply naive and thought that the past was a good indicator or the future, so the loans were safe because they would get the house if the owner defaulted, and the house would be worth at least the value of the equity the owner had after the down payment.  Lots of people made mistakes on both sides.  You can call it a conspiracy if you want, but I've found that most conspiracy theories were simply not real.    Other than that, I totally agree with you.  :) "I'm impressed.  She must have a substantial income to agree to a $500/month car payment.  I imagine her income is about 20K per month for that to make sense.  What kind of work does she do?  To answer your question, typical lease do not work the way you describe.  Paying an extra $2000 will allow you to skip 4 payments (provided the payments were exactly $500) any time in the future.  It does not modify the terms of the lease which would include the payment amount.  Also one does not receive a fiance charge reduction benefit as with a loan.  Essentially you are providing a loan to the leasing company for free. To be explicit you cannot tell the mortgage company anything as she is applying for the loan, not you.  She can tell the mortgage company the new payment is $400, but she would be falsifying the application which is not advisable. Perhaps the mortgage company is doing her a favor.  They are indicating her life is out of control financially.  Either she is attempting to purchase way to much home or her consumer debt is out of control.  It could be a combination of both.   My first paragraph was written to be ""tongue in check"" in order to demonstrate absurdity.  Without a substantial income and an substantial net worth, a 500/month car payment is simply ridiculous.  While it is someone average, when you compare it to the average income (~54K/year) you understand why 78% of US households live paycheck-to-paycheck (are broke), and have no retirement savings. For your and her sake, please stop giving all your hard earned money to banks." It's definitely NOT a good idea to pay off one of the smaller loans in your case - a $4k payment split across all the loans would be better than repaying the 5% / $4k loan completely, as it's the most beneficial of your loans and thus is last priority for repayment. A payment that splits across all the loans equally is, in effect, a partial repayment on a loan with an interest rate of 6.82% (weighed average rate of all your loans).  It's not as good as repaying a 7% loan, but almost as good. It might be an option to save up until you can repay one of your 7% loans, but it depends - if it takes a lot of time, then you would've paid unneccessary interest during that time. If you know the amounts that were combined ($5,000 and $7,500 in your example) -- NOT the original loan amounts necessarily -- then you can calculate a payment schedule (in Excel, Google Sheets, online, etc.) using that amount and the interest rate.  You can then apply your payments ($100) to that payment schedule, making sure to either accrue interest if your $100 didn't cover the monthly payment, or pay down extra principal if your $100 more than covered the payment.   The outstanding principal is the amount left or remaining balance. A program like GnuCash or Quicken makes doing the payment schedule, and applying payments relatively easy to handle.  Spreadsheets will require you to have 36 lines (3 years x 12 months) of payment and recalculation detail, but that shouldn't be too much work. To be fair to your mother, make sure you include any partially accrued interest on the full balance when paying it off.  Or even better, include a full month's interest in the pay-off amount. You might try to refinance some of those loans. It sounds like you are serious about minimizing interest expense, if you think you will be able to pay those loans in full within  five years you might also try a loan that is fixed for five years before becoming variable.  If you do not think you can repay the loans in full before that time, you should probably stick with the fixed rates that you have. It may even be profitable to refinance those loans through another lender at the exact same fixed rate because it gets around their repayment tricks that effectively increase your interest on those two smaller loans.