Should I pay my bond a few days early?

CityPress - - Business -

Rid­wan asks:

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.

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