What You’ll Learn
- We’ll go over your options for making an additional principal payment on your Salal loan or mortgage.
A principal payment, also known as a principal-only payment, is an extra payment made on a loan or mortgage, over and above your regular scheduled payment. This concept is relatively straightforward but can have a big impact on how quickly you pay off your loan and how much you end up paying in the long run.
The principal of a loan or mortgage is the amount of money that was originally borrowed. For instance, if you secure a car loan for $10,000, your principal at the outset is $10,000. With every payment you make, part of your payment goes towards reducing this principal and part covers the accrued interest.
There can be several benefits to making additional principal payments. First and foremost, by reducing the principal balance of your loan faster, you’re actually reducing the amount of interest you’ll pay over the life of your loan. Interest is typically calculated based on the remaining principal, so a lower principal equals less accrued interest. This could potentially save you a significant amount of money, especially on long-term loans or mortgages.
For homeowners, there’s another potential advantage to making these additional payments. Every time you chip away at the principal of your mortgage, you’re building equity in your home at a faster rate. Equity refers to the portion of the property you truly own, as opposed to the part that’s still under the lender’s ownership via the mortgage. Increasing this equity not only moves you closer to full ownership quicker, but can also provide you with more financial flexibility, as you can tap into this equity for other financial needs if you need to.
Want to see how many months you could possibly shave off your loan by making principal-only payments? Check out this Prepayment Analysis Calculator.
Making a Principal Payment on Your Salal Loan or Mortgage
Now, let’s look at your options for making an additional principal payment.
In Mobile or Online Banking
You have several options within digital banking for making a principal-only payment. First, you can go to Loan Payments under the Transfers tab to make a one-time payment. While making your payment, you can specify your additional principal payment in the “principal amount” field.
You can also make principal-only payments through the Transfers and Bill Pay features in digital banking. With both these options, you can pay more towards your principal by adding additional funds to your monthly payment or by making an extra payment. The extra funds will be applied to your principal as long as the extra payment is made on the same day as your regular payment due date. Note: if you make an extra payment after your regular payment due date, the extra funds will be applied to the next month’s payment and pay your normal interest before your principal.
Automatic Payment (ACH)
When you set up automatic payments, you can choose to include additional funds. Any payment amount over the required minimum due will be applied to your principal.
Set Up Bill Pay from Another Financial Institution
If you make your loan payments from your account at another credit union or bank, you may be able to set up bill pay with that financial institution. Any payment amount over the required minimum due will be applied to your principal. You will need to set up these payments through your other financial institution.
Other Ways to Make Additional Principal Payment
- Visit a Salal branch or a Shared Branching location to make a payment. Let your Salal team member know you would like to make a principal payment.
- Mail in a check to us at PO Box 7492, Carol Stream, IL 60197-7492with a note to apply the payment to your principal.
- Call our Virtual Branch to make a one-time rush phone payment with live assistance. (Note: there is a $19.99 fee for this service. Only ACH or debit card is accepted from non-Salal accounts.)