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We often talk about financial automation as a convenience. Instead of having to remember to pay your bills before their due dates, they'll get paid automatically.
But for some bills, there's actually a financial incentive to automating your payments.
While some service providers (like Sprint) may give you a one-time credit for automatic payments and online invoicing, you might be able to save a lot more cash on longer-term loans.
Shaving Interest off of Student Loans
When I graduated from college, I had a pretty fat student loan debt. It's not anything to write home about, but I'm still paying it off.
About 9 months after I graduated, I consolidated my loans with the Department of Education's Direct Loan Servicing Program. As part of the re-payment process, you have the option to enroll in the Electronic Debiting Account (EDA) repayment method.
Like with all autopayment services, the provider wants to ensure that they're getting paid every month, on-time and in full.
So, in order to get more people to enroll, they offer a quarter point discount (.25%) on the loan's interest rate. Instead of a 5.375% APR, it's down to 5.125%.
The second bonus comes from making the first 12 payments on-time — an easy thing to do when you're in an autopayment program.
What's Your Debt Reduction Story?
Next week, I'll be hosting the Carnival of Debt Reduction, sharing your stories about paying off your debt.
If you've got a great story, submit it to the carnival now.
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Comments
04.24.09
Great advice. I will definitely remember this for when I graduate next year. This stuff gives me such a headache.
04.24.09
Awesome! I need to look into consolidating.
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