A buydown is simply a lump sum put toward
a particular debt. There are good points to a buydown, but
be certain that it’s the best step for your situation
before you make the payment.
One thing to consider is whether there’s an early payoff
pre payment penalty
to your loan. Most credit cards don’t have that kind
of penalty, but some loans do. Take a look at your loan or
credit agreement.
Another important point to consider before making a buydown
payment is whether it’s the best use of your money.
For example, if your loan or credit account has a very low
interest rate, putting the money in an interest-bearing account
may be a better financial decision. That’s especially
true if your account has a specific finance cost - a set amount
that remains the same regardless of the payoff date.
A buydown may be a positive step if the lump sum payment
significantly lowers your monthly payments.
Remember that you should contact your creditor
before you make a final payment on any loan or account to
be certain of the amount due. Interest calculated on the Principal
changes the daily payoff.
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