On face value, Bi-Weekly and Accelerate Bi-Weekly payments look like innocent neighbours separated by a small fence (Accelerated). But nothing could be further from the truth!
Accelerated payments are a power tool for debt payments.
What is the difference?
Let’s start with what’s the same. For both Accelerated Bi-Weekly and Bi-Weekly payments, there are 26 payments per year. The difference is in how much you pay for in each period.
How do they come up with that?
It starts with your monthly payment. In accelerated bi-weekly,
Payment = Monthly Payment x 12 / 24
As I stated above, this amount is applied 26 times.
For a normal bi-weekly payment,
Payment = Monthly Payment x 12/26
Again this amount is applied 26 times.
Notice how the formulas are the same expect for that little divisor number 24 vs. 26.
I see that, but does it make that much of a difference?
That simple math makes all the difference. Let’s use a simple example,
While this is a contrived example, it nonetheless proves the point: a difference of less than $2, can a difference of between paying a debt for 65 years vs 21 years.
Wow!, thats a big difference, wonder what else can make such a big difference?
It turns out the comma can also make a big difference. Back in the day, the following telegram was sent by a sick wife to her husband, a travelling saleman:
NOT GETTING ANY, BETTER COME HOME SOON.