Sallie Mae Loan debt is not going down after 6 years of on-time payments?!?
In 2005, I got a Sallie Mae loan for $8,959 at an interest rate of 13.25%. I start making payments on it in Jan of 2007, always on time, and always more than the minimum amount (sometimes nearly double).
Today, I check my loan balance and I see that my loan balance is $9,288.96, several hundred dollars MORE than the original loan amount. I've calculated up all of my payments over the last 6.5 years and these are the numbers I've come up with:
Original Loan Amount: 8959.00
Outstanding Principal: 10648.62
Interest Rate: 13.25%
Loan Date 11/16/2005
Repayments Started: 1/13/2007
Over the last 6.6 years:
Total Amount Paid: 12176.07
Amt Applied to Principal: 2973.04
Amt Applied to Interest: 9154.67
Current Loan Balance: 9288.96
Capitalized Interest: 2546.00
This just doesn't seem right that such a huge chunk of my payments are going toward interest, and that after 6+ years of payments, I still owe so much on such a small loan. Had this been a car loan for $10,000, it'd had been paid off years ago.
Is this normal or should I seek some sort of financial consultant to help figure out why this thing isn't going down?
- rowlfeLv 77 years agoFavorite Answer
The problem is the interest rate and how much you are paying. You are not paying enough to offset the interest charges AND chip away at principle. What you need to DO is pay MORE each month so you not only offset the interest charged for that month, but reduce the balance of the loan as well! Treat this like a mortgage. Dig out an excel spread sheet and plug in the balance outstanding, the current interest rate and then assume 5 years for the time period, and then have it calculate the payment you SHOULD be making to pay off the balance in 5 years. I see you had a year plus where you made NO payments, and THAT is where you got hit for interest, big time! Every month you went without making a payment, they ADDED interest to what you owed! And THAT is how you went from initial 8959 to 10648.62. My mortgage calculator says that for a present value of 9288, with an annual interest rate of 13.25% for 60 months, you should be paying 212.55 per month. To pay it off in 24 months, the payment works out to be 442.71. So, get out a mortgage calculator, like the financial functions in Excel and figure out how much you can afford and then do the math. By the way, based on your numbers above, you have only paid on average 156 per month (for a car payment, this should be 212.55 for a 5 year loan), which barely puts a dent in principle after paying off the added month of interest since the past payment. It is NO WONDER you are still in such bad shape! Use a mortgage calculator, do the math for a fixed period of time to calculate the payment schedule and them make the payments! And the good thing is, if you DO make the scheduled payments, your loan WILL be paid off completely at the end of the time period you chose... I used 5 years and 2 years in my sample calculations, choose whatever YOU want. You DO realize that for something like a credit card, if you make the minimum payment, it will take over 20 years to pay off the current balance and accrued interest charges? AND 98% of all the dollars you PAY will go toward interest? A 2 dollar loan will cost you 100 dollars to pay back if you pay the minimum payment that they tell you! They do NOT want you to get out of debt. They see YOU as a cash cow if you pay the minimum... And THAT is why it is NOT going down as you think it should. You do NOT need a financial consultant. THAT guy, you will have to PAY to tell you exactly what I've said HERE. MY advice is totally FREE and I even got paid 2 points! Get a calculator and do the math... If you have a spreadsheet program, USE it to do the financial calculations!
Bottom line: pay as much as you CAN, OVER the minimum, each and every month, the more the better, the sooner the better.
- lillianLv 44 years ago
You run the threat of the brand new mortgage disqualifying you from your loan, creditors can, do and can re-run your credit before you go to closing to make sure that you could still make the payments. Many humans have made the error of getting a mortgage, getting excited, charging up a bunch of credit shopping stuff for the brand new house, best to find out that the new debt they have got incurred now disqualifies them.
- AcheliosLv 77 years ago
your monthly payment has been only @ $152.00 per months
if this had been a $10,000 car, your monthly payments would have been @ $450 to get it paid off in 4 years, even at apx the same interest rate
the problem in getting this paid-down is that your payments are very low
if you want to get it paid off in the next 6.6 years, quadruple that monthly payment