If you have student loans, you may or may not have wondered just how your loan works and how the lender determines the schedule for how the loan gets paid off? Well read how student loan amortization works.
Basically, amortization is how the interest costs will be distributed throughout your loan, in this case usually a 30 year mortgage. In other words, it is why your $300,000 house actually costs well over $500,000 when all said and done.
The loan amortization schedule shows the schedule by which the loan will be paid off if the monthly or periodic payments are made from the first payment to the last payment.
Making extra payments each month or just extra payments when you have some spare money lying around is huge.
$25,000 student loan that is going to be paid off in 10 years at a 7 percent interest rate, without making an extra monthly payment, the loan is paid off in the 10th year.
Basically the more you pay now, the less you will pay later. The more you can get the principal balance down, the less interest you will pay.