The Round Number Payoff Strategy

The round number payoff strategy is an effective strategy for paying off large debts fast. Its brilliance is in its simplicity – whenever making a payment toward a large balance, add an extra amount of principal payment such that the balance after that payment is applied is an even number. For example, let’s say your mortgage payment is $1,434.45, and after you make the latest payment, your loan balance will be $299, 123.68. If you add an extra principal payment of $23.68, your loan balance will be $299,100. Better yet, if you can add $123.68 to the monthly payment, your mortgage balance will be $299,000. You might be thinking, “What’s the difference?” The most important difference is that you are focusing on your loan balance, paying attention to it, and making a conscious effort to reduce it. The other difference is that there is something motivating in making the balance an even number. Odd numbers are messy. The ultimate impact is that over time, by employing this strategy you will achieve two very important things: First, you will shorten the time it takes to pay off your loan. Secondly, in doing so, you will have reduced the amount of interest paid.