When drawing up a budget, it is always wise to put any extra cash towards increasing your monthly installments on debt.
It does not matter how small the amount is, if you pay extra to towards debt, you can realise a saving because interest is calculated on the outstanding balance daily and the repayment period is shortened.
Every extra rand you pay will save you interest and this effect compounds over the life of the loan.
Ariel Eliasov, Head Credit for FNB Loans said, "There are two common misconceptions when it comes to paying back a personal loan: the first is that one must stick to the contractual repayment or settle the agreement entirely – this is not true, credit providers are required by law to recognise additional payments and every extra rand paid above the contractual installment will save you interest. The second misconception is that there are penalties associated with paying extra when, in fact, early settlement fees only apply to large credit agreements (typically mortgages)."
Eliasov added, "Even on large agreements, no fee is applicable if the agreement is not settled entirely – this means that you can save interest charges without attracting any penalties by paying extra. If you are concerned about penalties check your contract to see how they are applied".