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Adding extra to your monthly payment would reduce your principal balance faster since more money would be left over after finance charges. Having a lower balance sooner in turn reduces your interest payments, as your interest rate would apply to a smaller amount and compounding would be diminished. In short, you’ll save a lot of money in the long run and get out of debt much sooner – if you can afford to scrimp now. But we know that adding extra to your monthly bills could be a big deal!

Making smaller payments more frequently is a great way to build discipline and improve budgeting efforts. It will also save you money on interest and help you get out of debt sooner. How? By making more than one payment per month, you would reduce your average daily balance – the amount your APR applies to. You would therefore pay less in interest each month. With lower monthly costs, more of your budgeted monthly payment will apply to your principal balance and you’ll be back above water ahead of schedule.

The longer your loan term is, the more you’ll pay in interest. That’s because interest compounds over time, which means a given month’s finance charges are the result of applying your account’s APR to the sum of your principal balance and the interest you were charged the month before (and the month before that, etc.). In order to use this saving strategy, however, one must be able to afford higher monthly payments. You’ll save on interest in the long run; fewer monthly payments simply demand bigger monthly contributions.

With a higher down payment, you won’t need to borrow as much. As a result, your loan’s interest rate will apply to a smaller amount from the start, with your monthly savings compounding over time. Monthly payments would also be more manageable. The obvious impediment, however, is short-term affordability. Most people put down as much as they think they can afford, and coming up with a few thousand dollars extra is a big ask. But if you comfortably afford to place a higher deposit, without jeopardizing retirement savings or your emergency fund, your wallet will ultimately thank you.