This article explains how to make extra payments toward your loan principal using a cashier’s check or certified check, how those payments are applied, and what to expect when submitting additional funds.
Table of Contents
- What Is Principal?
- What Is an Extra Principal Payment?
- Using a Cashier’s or Certified Check
- How to Submit an Extra Principal Payment by Check
- How Extra Principal Payments Impact Your Loan
- Important Things to Confirm Before Sending a Check
What Is Principal?
Principal is the original amount borrowed on your loan.
Each standard loan payment typically includes:
- A portion toward interest
- A portion toward principal
Interest is calculated based on your remaining principal balance. As principal decreases, the total interest paid over time also decreases.
What Is an Extra Principal Payment?
An extra principal payment is any payment made in addition to your required monthly payment that is applied directly to reduce your loan balance.
This payment does not replace your scheduled payment — it is applied on top of it and reduces your outstanding principal immediately.
Example:
- Required monthly payment: $2,000
- Extra principal payment: $5,000
- Total submitted: $7,000
The additional $5,000 reduces your principal balance directly.
Using a Cashier’s or Certified Check
A cashier’s check or certified check is a guaranteed form of payment issued by a bank.
- Cashier’s Check: Issued and guaranteed by the bank using its own funds.
- Certified Check: Drawn from your personal account, but certified and guaranteed by the bank.
These forms of payment are commonly used for large transactions because they provide verified, secure funds.
How to Submit an Extra Principal Payment by Check
When sending a cashier’s or certified check for extra principal:
- Make the check payable to the official loan servicer listed on your statement.
- Include your loan number in the memo line.
- Clearly write “Principal Only Payment” in the memo section.
- If required, include any payment coupon or documentation provided by your servicer.
⚠️ If the payment is not clearly designated as “Principal Only,” the funds may:
- Be applied toward future scheduled payments
- Be applied to accrued interest
Once received and processed, the principal balance on your loan will be reduced accordingly.
How Extra Principal Payments Impact Your Loan
Making extra principal payments using a cashier’s or certified check can:
- Reduce your loan balance immediately upon processing
- Lower the total interest paid over the life of the loan
- Shorten your repayment timeline
- Improve your loan-to-value (LTV) ratio
Because interest accrues based on your outstanding balance, reducing principal earlier can result in significant long-term interest savings.
Important Things to Confirm Before Sending a Check
- Is the payment address correct for principal payments?
- Is “Principal Only” clearly written on the check memo?
- Have you included your loan number?
- Are there any prepayment penalties? (Rare, but important to verify.)
- How long does processing typically take after receipt?
If you have questions about submitting extra principal payments or where to send certified funds, please contact support before mailing your check.