Why biweekly payments pay a loan off faster
A year has 26 two-week periods. Paying half of the monthly payment every two weeks means 26 half-payments, equal to 13 full monthly payments instead of 12. That extra payment each year goes to principal. Payments also reach the balance sooner, which trims interest slightly.
Example
On a $300,000 30-year loan at 6.5% APR, switching to biweekly payments pays the loan off in about 24 years 2 months, roughly 5 years 10 months early, and saves about $88,100 in interest.
Assumptions and caveats
- The calculator assumes your lender applies each half-payment on the day it is received and accrues interest at APR/26 per period. Many servicers instead hold the half-payments and apply them monthly, which gives a smaller benefit.
- Some third-party biweekly programs charge setup or per-payment fees. You can get a similar result for free by adding one-twelfth of your payment to each monthly payment.
- Ask your servicer whether they offer a true biweekly plan before enrolling.
See also the extra payment calculator.