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Savings and Debt Update

1 Jun

It’s the first of the moooonnnnnth!! Wake up, wake up. Cash your checks and come oooooonnnn!

Incremental progress is progress nonetheless. On or about the first of every month, I will post an update of my savings and debt totals.
By Sunday, I will have opened an online high-interest savings account (I’m looking at American Express @ 1.15% APR, but ING Direct does offer subaccounts) where I will direct the payments from my Direct Loans which total $330.11 monthly. I am going to set up automatic transfers of $165.00 bi-weekly from my Chase Checking Account until my loans are out of forbearance in October. To date, I have been unable to really save any of the funds due to my bar exam expenses.

SAVINGS TOTAL @ Wells Fargo: $1456.12

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Online Bill Pay and Principal Reduction Payments

2 Dec

The fastest way to reduce debt is by having additional payments applied to directly reduce the principal amount owed. Previously I mailed in payments for my loans. For my Citibank loan I could easily check a box to have the additional money be applied to the principal rather than to advance the payments. Now that I have somewhat automated my finances, I don’t have this option. Seems like I am not the only person who has encountered such an issue with a loan. Check out an excerpt from a post on The Consumerist:

“This wouldn’t be a huge deal if the online bill-pay options allowed you to choose between early payment or principal reduction (although why anyone would choose early payment is beyond me), but instead special checks have to be mailed to Chase Auto Finance for any principal reduction to occur. ”
Several readers in the comments have the same issue as well.

I find it rather interesting Citibank, as do most student loan servicers, has an interest rate reduction incentive to induce its borrowers to sign up for automatic debit, but does not have an option on the website to have additional payments apply to principal reduction rather than early payment. Additionally when I view my statements online, there is a box that I could check to apply extra towards principal if I were mailing in my payment. I guess going green and getting out of debt quickly aren’t compatible.

I was told both by Citibank and Direct Loans, I could either mail in a separate payment for principal reduction or continue with electronic payments, but call every month to have the payment applied according to my instructions. The extra work to do this is why it has taken so long for me to reduce the balance of my loan. I have been merely making early payments every month.

In the Internet Age, it’s hard to come to any other conclusion than the banks want you to incur as much interest as possible. While I understand it is a business, we as consumers should at least have the option of online principal payment reduction.

Are you having a similar issue with any of your debt obligations? How have you chosen to deal with it?