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The Rounding Up Habit

The Rounding Up HabitHaving debt hanging over your head can weigh you down.  Perhaps you are looking for a way to lighten the load.  Whether your debt is a mortgage, credit card bills, a car loan, or any other loan, one way to get out from under debt is to simply round up the payments you make.

Rounding up your payments can be a great way to accelerate toward your goal of being debt free. Susan Taylor, an Iowa State University Extension and Outreach educator, provides two examples to illustrate how rounding up works:

Example #1:  “Suppose your current car payment is $360 per month.  If you round up and make monthly payments of $400, that is like making one extra payment during the year on your car, and the extra money goes toward the principal on the loan. You’ll reduce your interest costs, and you will also pay off the loan faster.”

Example #2:  “If your mortgage payment is $900, but you pay $1,000/month, the extra $100 goes toward the loan principal. That’s an extra $1200/year!  If $1,000 is too much for your spending plan, try $950, which is an extra $600 per year. Over several years, either strategy will save thousands in interest and get your mortgage paid off years early.  Read the fine print on your contract. Make sure your lender accepts larger payments.”

The strategy of rounding up can also be used when you are trying to pay off credit card bills, or any loans where you are carrying a balance.

Source:  Susan Taylor, “Could Rounding Up What You Pay Help You?” Money Tip$, Iowa State University Extension and Outreach, 5/15/2018

Photo Source: https://pixabay.com/en/debt-eliminate-loan-deficit-payoff-37557/ (downloaded 7/17/18)


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