Do prepayments / extra payments go to the principal or interest?

Short answer

All payments received are applied in this order:

  1. Monthly principal and interest bills due (oldest first)
  2. Fees due (oldest first)
  3. Unbilled principal

Detailed answer

The Mosaic system creates bills 24 days before the next monthly payment is due. If any billing(s) exist in the system, your payment will first be applied to those existing bills, then to any outstanding fees, and then to your principal balance. If you have any late/overdue bills, those bills will be paid first. Your current bill will be paid next. After existing bills are settled, your payment will be allocated to any outstanding fees (such as late fees or Non-Sufficient Funds fees). Once your payment has covered all existing bills and/or fees, any amount remaining will be applied to principal.

If you are interested in making a “principal-only” payment, the best approach is twofold. First, keep your account current by paying your bills on time. This will minimize any overdue bills or fees that might otherwise accumulate. Second, if you have extra money to put toward your loan, overpay on your next monthly payment. Assuming you’ve been making all payments on time and your account is current, your regular monthly payment should clear out the current billing, and the extra money will go directly to principal. Put simply, making one payment on your regular due date that includes the extra amount will yield the best results.

Since our system creates bills 24 days in advance of the next monthly payment, you will technically have at least 4 days after your regular monthly payment due date before a new billing is created (slightly more for 31-day months). With that in mind, if you make an extra payment within just a few days of your regular monthly payment, you should still expect to see it applied completely to your principal balance as long as your account is current. Still, the best practice is to overpay on your payment due date. It’s useful to understand where there is a little bit of flexibility based on our billing cycle.

All of this adds up to a great reason to sign up for ACH/auto-pay in the “Manage Payments” section of your online borrower account (if you haven’t already done so). Paying by automatic payments saves you time and money, plus it supports precise payment management, which you’ll need if you want your extra payments to apply to as much principal as possible.

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