Biweekly vs. monthly payments: What really makes a difference with personal loans

It's always smart to go into a new loan knowing how you plan to manage repayment. You'll be ahead of the game if you know how and when you're going to make your payments.

Typical personal loans are set up to be paid once per month, with each monthly payment for the same amount. That may not be your only option for making loan payments, however. Most lenders will let you make more than one payment each month, giving you some flexibility in how you pay. 

Not sure whether it makes more sense to stick to one monthly payment or multiple payments? Let's explore how various ways to pay could work and how to choose the right strategy for you.

How monthly vs. biweekly payments work

Monthly payments are just that: You make the same payment once per month, ideally a few days before your due date (and never late if you can avoid it!). This means a total of 12 full loan payments each year.

However, you could also choose to pay more often. Most people get paid biweekly (every two weeks), so that's a common payment schedule to consider. 

On average, biweekly means two payments per month. So with a typical biweekly payment schedule, you'd make a payment equal to half of your monthly loan payment every two weeks.

There are 52 weeks in a year, which would mean 26 biweekly payments—or 13 full loan payments over the course of the year. In other words, paying biweekly means you end up making one extra full loan payment each year.

Can I save money by making extra payments?

Yes! Extra payments—payments that exceed your required minimum loan payment for the month—typically go directly to your principal loan amount (if they don't automatically, ask the lender to do so). That means paying off your principal faster, reducing the amount of time you'll need to pay off your loan. This in turn cuts down on the amount of interest you pay, saving you money on your loan overall.

How much faster could I pay off my loan with biweekly payments?

If you make half-payments on a biweekly schedule, that equals one extra full loan payment each year. At that rate, biweekly payments could help you pay off your loan several months earlier than if you just make monthly payments. 

The exact amount of time you can shave off your loan will depend on how much extra you pay and the length of your original loan term. Let's look at an example.

Example: How extra payments could add up

Consider a $10,000 personal loan at 12% APR with a four-year repayment term. Here's how monthly vs. biweekly payments would look:

In this example, making biweekly payments shaves five months off the total time to repay the loan. It also ends up saving you just over $300 in interest charges.

Is it better to pay a loan monthly or biweekly?

Which is better for you will depend on your goals and resources. In general, making extra payments is better than not since it helps you pay down your loan faster and for less interest. 

However, biweekly payments can be harder on the budget, so it might not be the best option if you're already struggling with your minimum payments. In that case, stick to regular monthly payments until you have more room in your budget.

Here's a quick breakdown of the pros and cons for each payment strategy:

Do personal loan lenders offer biweekly payments?

Yes, most personal loan lenders will let you make multiple loan payments in a month. Many will also let you set up automatic biweekly payments so you don't have to think about your payments as much. 

Some lenders may charge prepayment penalties. This is an extra fee for paying your loan off early. It's best to avoid lenders with prepayment penalties if you want the option to pay biweekly or otherwise pay off your loan before the end of the loan term.

Through Achieve Personal Loans, you can make extra payments at any time without penalty and there are no prepayment penalties or fees.

How can I set up biweekly payments on a personal loan?

Most lenders should let you set up automatic payments through your online account. This may mean through a mobile app or web browser. Alternatively, you may be able to set up automatic biweekly payments over the phone or by visiting a bank branch if your lender has physical locations.

Otherwise, you could simply make manual payments every two weeks. While it takes a bit more work, it's an option if automatic biweekly payments aren't available. Set up recurring reminders on your phone to make sure you don't miss a payment.

What's next?

Think biweekly payments might be the right move for you? Here's how to get started:

• Crunch the numbers. Make sure biweekly payments work for your budget.

• Check with your lender. Verify that there are no prepayment penalties.

• Set up automatic payments. Choose how much you want to pay every two weeks.

• Stay on top of your loan. Check that you're meeting your minimum payment each month.

With some dedication and patience, you could be done paying off your personal loan sooner than you think.