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Weekly VS Monthly Loan Contract – What You Need to Know

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Since the beginning of October 2015, the capping of monthly rates of interest was officially enacted. This capping means that interest rates that licensed moneylenders may charge is set at 4 %.

Some of the moneylenders have switched their borrowers to the weekly loan contracts (rather than the usual monthly ones) as a way to circumvent this law and compensate their losses in interest.

Even with this, there are those borrowers whose financial plan is about becoming debt free fast. Having and trying other options to help you repay debt may be a useful move.

The possible benefits of making weekly payments rather than the monthly will depend on the kind of debt you hold and how the rate is calculated. When you are paid each week, then making weekly loan payments will make it convenient for you to manage and track your payments.

Types of Debt Interest

The rate on your loan is worked out either monthly or every day. Fixed payment debts such as mortgages and car loans will calculate their interest each month. The rates of interest paid every month are computed on the remaining principal balance after receiving the last month’s payment.

Revolving debt like credit cards and lines of credit work out their interest each day. The interest is computed every day on the existing balance of your loan.

Making a payment late or even early within the payment cycle with this kind of debt impacts the interests charged on the following statement.

Making earlier payments help lessen the computed interest.

Smaller, Yet More Regular Payments

When you divide your monthly payments by 4 and then you be making a payment every week covering four payments a month on the fixed payment personal loan. Then it means the interest computed for the following month will not be different as when you make one payment ahead of the loan due date.

When you, however, make weekly payments on the revolving credit debt, then the interest charged for the following month will be less than when you are to make one payment right before the debt’s due date.

Thus for credit cards, the smaller interest charges mean that the minimum payment for the following month will get slightly lower.

The Benefits of making Weekly Payments

In making weekly payments on your debt, the loan will reduce faster than when you are making monthly payments. This is when you put in a payment each week in the year, and this is equal to 52 installments.

When you take your monthly payment amount and then divide it by 4, it will take you 48 weekly contributions to help you cover the payments to be made in a year. However, if you pay that very amount each week, the extra 4 payments each year will go directly towards reducing your whole loan balance.

The outcome is similar to making 13 monthly contributions within the year, thus shortening the period you need to repay the loan.

Repay Credit Cards Fast

When you would like to pay back your credit cards following the weekly plan, the key to quickly paying down your card balance is to maintain the weekly payments on the same level. Every month the minimum payment keeps going down, but you will need to continue paying following the same weekly plan. Thus avoid lowering your weekly repayments to the new installment divided by 4.

Then after some months, you may notice your credit card balances starting to reduce at a much faster rate compared to the time you were making payments at or near the minimal payment

Tip: Provided that your loan does not have a pre-payment penalty, you may consider making weekly payments rather than monthly on any of your loans, starting from credit card debts to a mortgage.

Putting in more regular, smaller payments towards your debts will help you repay them more quickly. The weekly payment plan rather than the monthly plan will also assist you to budget your money. More so, for someone who gets weekly or the bi-weekly paycheck.

You can use a specific amount of the money from each paycheck to put in a payment. This way you will not have to save up a large sum to make the payment at the end of each month. When you choose to make weekly repayments, be sure that you arrange so that they be deducted automatically from your account. This way you will not have to spend much money on postage.

Start by dividing the sum amount you usually pay for your debts each month by 4. For instance, when you normally pay $200 each month for a car loan, then divide this amount by 4 to arrive at $50 a week.

Even though each month usually has four weeks, some months have five instead, because a year has 52 weeks. When you make payments of $50 for 52 weeks, then you will in end have paid an additional $200 a year, which is $2,600 rather than $2,400 if you had paid $200 each month.

You can also consider adding a small amount to every weekly payment that you make. This will serve to further help lessen the time it will take you to repay the debt and also the amount in interest that you pay.

When you pay $200 for your personal loan every month, you can increase it to about $300 only by adding $25 on each payment. This additional $100 each month will not appear as significant when it is broken down into much smaller payments, however, it can make a much bigger impact in repaying down your existing debt.


When your financial plan is about becoming debt free fast and you are trying other options to help you repay your debt. Then you will need to consider the loan type you hold and your salary. Even then given that your loan does not come with a pre-payment penalty, you can consider making weekly payments instead of the month on any loan. This starting from card debts to the mortgage.

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