What is the Difference Between Fortnightly and Monthly Loan Repayments?

The main difference between fortnightly and monthly loan repayments lies in the frequency of payments and the potential interest savings. Here are the key points to consider:

1. Frequency: Fortnightly repayments occur every two weeks, while monthly repayments occur once a month. There are typically 26 fortnights and 52 weeks in a year, which means fortnightly or weekly payments can help you make an extra month's worth of monthly repayments each year.
2. Interest Savings: By increasing the frequency of payments, you can potentially save on interest charges. For example, if you switch from monthly to fortnightly repayments, you'll be paying an extra payment each year. This can cut the time it takes to repay your loan and save on interest charges.
3. Budgeting: Fortnightly or weekly repayments can make budgeting easier for some borrowers. If you're paid fortnightly, you might prefer to have your mortgage repayment direct-debited from your account the day after you receive your pay.

However, the interest savings and potential loan term reduction depend on how your lender calculates your repayments. Some lenders may calculate fortnightly repayments by multiplying the monthly repayment figure, which may not result in the same interest savings. It's essential to check with your lender about their method of calculating fortnightly repayments when considering changing your repayment frequency.

In summary, fortnightly loan repayments can potentially save you money on interest charges and help you pay off your loan faster. However, the actual savings depend on your lender's method of calculating repayments. It's crucial to understand your lender's calculations and consider your budgeting preferences when choosing between fortnightly and monthly repayments.

Comparative Table: Fortnightly vs Monthly Loan Repayments

The main difference between fortnightly and monthly loan repayments lies in the frequency of the payments and the potential savings in interest over the life of the loan. Here is a table comparing the two types of repayments:

Keep in mind that the actual savings and loan term reduction depend on how the lender calculates the fortnightly repayments and the interest rate applied to the loan. Some lenders may use a "true" fortnightly calculation, while others may simply divide the monthly payment by two. It is essential to check with your lender about their repayment calculation methods to ensure you are making the most of your loan repayments.