Should I pay my bond a few days early?
Ihave been told that by splitting my monthly instalment into two payments over the month (for example on the 15th and the 30th of the month), I can save on interest, as interest is calculated daily, so the payment on the 15th reduces the capital outstanding for 15 days until the interest amount for the month becomes payable on the 30th.
I was wondering if you could elaborate a bit on this option and advise whether our local banks actually offer this option.
City Press replies:
You can certainly enter this arrangement, but remember that the payment on the 15th must go off For example, if your bond repayment is currently due on the 30th and you pay half of it on the 15th and then half on the 30th, you benefit from the interest saving, but you need to have that payment available earlier than normal.
If you only pay half on the 30th and then the next half on 15th, you will end up paying more interest.
Another way to cut interest is for your bond to go off the day after payday rather than at the end of the month.