Two common reasons someone might choose a higher monthly payment are to save on total interest and to shorten the loan term. Here’s a quick breakdown:
- Pay less overall interest: By increasing the monthly payment, a larger portion of each payment goes toward reducing principal, which lowers the total interest charged over the life of the loan. This can result in significant savings, especially on long-term loans.
- Accelerate payoff: Higher monthly payments reduce the loan’s term, enabling debt freedom sooner and freeing up future income for other goals. This also reduces the risk of owing on the loan for a long period.
