One extra payment is essentially made each year, thereby slashing interest costs by shortening the life of the loan. Or, they can add a little something extra to their regular monthly payments on their own.
Critics say that's a waste of money, plus borrowers are locked into a stricter payment schedule.
But plan administrators maintain most people lack the discipline to make extra payments on their own, and whatever fee is charged, is a small price for something that ultimately could save loads of money. Lenders have been pushing the prepayment strategy lately, and a growing number of third-party collection companies have been springing up to cash in on this hot home loan product. Some lenders have even proo think the year 2000 is really 1900 and chew up reams of data that run modern lives. Industry and government disagree about how widespread problems will be, and some companies see opportunity in the confusion. Territorial Seed Co. in Cottage Grove, Ore., says its Millennium Victory Garden kit is its best-selling item ever.