Posted by John Behle on November 22, 1998 at 14:53:16:
It’s a nice way to make sure you get paid. One enticement is to encourage a shorter amortization. Let’s say you have a 10k note @10% with payments of $87.76 per month. The note would amortize in 30 years. If we were to encourage the payor to round his payment up to $100 and set it up on EFT, it would amortize in 216 months. That is 18 years instead of 30 - ALMOST HALF.
Go further and show the payor the amount of interest he will save. In the original note, he would pay a total of $31,593.60 in payments. $21k of that is interest. After the note is restructured, he will pay a total of $21,600 in payments - $11,600 in total interest. That is a savings of $9,993.60 for the payor for only a twelve dollar increase in his payment.