Bi-Weekly vs. Accelerated Bi-Weekly — What's the Difference?
By Maham Liaqat & Urooj Arif — Published on March 22, 2024
Bi-weekly payments occur every two weeks, while accelerated bi-weekly payments are also every two weeks but slightly higher, effectively making one extra monthly payment per year to reduce the loan principal faster.
Difference Between Bi-Weekly and Accelerated Bi-Weekly
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Key Differences
Bi-weekly payment plans divide the monthly payment in half, with payments made every two weeks. This results in 26 half-payments or 13 full payments annually, as opposed to the 12 payments made on a monthly basis.
The accelerated bi-weekly plan also schedules payments every two weeks but calculates the payment as if dividing the monthly payment into two, then paying that amount every two weeks. This subtle increase means you effectively pay an extra month's payment each year.
The main difference lies in how the payments are calculated and their impact on the loan's lifespan. The accelerated bi-weekly payments lead to significant savings on interest and can shorten the loan term because of the additional amount paid towards the principal each year. In contrast, standard bi-weekly payments offer a structured yet less aggressive approach to loan repayment, without the same level of interest savings or term reduction.
The choice between the two depends on financial flexibility and goals. Those seeking to pay off their mortgage or loan faster and save on interest might prefer accelerated bi-weekly payments. However, it requires the ability to commit to slightly higher payments throughout the year. Standard bi-weekly payments still offer the benefit of one extra payment per year but without the additional financial commitment of the accelerated option.
Both options provide a systematic way to pay down debt faster than traditional monthly payments, but the accelerated bi-weekly plan maximizes this benefit. It's important to consider personal budget constraints and long-term financial goals when choosing between these payment strategies.
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Comparison Chart
Number of Payments per Year
26 half-payments (13 full)
26 half-payments (13 full)
Payment Amount
Half of the monthly payment
Slightly more than half of the monthly payment
Total Annual Payment
Equivalent to 12 monthly payments
Equivalent to 13 monthly payments
Impact on Loan Term
Slight reduction
Significant reduction
Interest Savings
Moderate
Significant
Financial Flexibility Required
Lower
Higher
Compare with Definitions
Bi-Weekly
Payments made every two weeks, totaling 26 per year.
A bi-weekly payment schedule splits the monthly cost into two, paid every other week.
Accelerated Bi-Weekly
Shortens loan term more significantly than standard bi-weekly.
Accelerated payments can shave years off a mortgage compared to standard plans.
Bi-Weekly
Offers a manageable way to slightly accelerate loan payoff.
Choosing bi-weekly payments subtly reduces loan interest over time.
Accelerated Bi-Weekly
Every two weeks, higher than half of the monthly payment, leading to 26 per year.
Accelerated bi-weekly payments effectively squeeze in an extra month's payment annually.
Bi-Weekly
Results in 13 full payments annually, without increasing individual payment amounts.
Bi-weekly payments naturally result in an extra full payment each year.
Accelerated Bi-Weekly
Directs more money towards the loan principal, reducing interest.
The extra payment annually accelerates principal reduction and saves on interest.
Bi-Weekly
Less aggressive approach to loan reduction than accelerated options.
Bi-weekly payments are a less intensive method for managing long-term debt.
Accelerated Bi-Weekly
Requires financial capability for slightly higher regular payments.
Opting for accelerated bi-weekly payments demands a tighter budgeting discipline.
Bi-Weekly
Provides a structured repayment path with moderate interest savings.
Bi-weekly schedules offer predictable financial planning with some savings.
Accelerated Bi-Weekly
Ideal for those seeking to pay off loans faster and save money.
Accelerated bi-weekly is a proactive strategy for debt management and savings.
Bi-Weekly
Alternative form of biweekly
Common Curiosities
Are there any downsides to accelerated bi-weekly payments?
The primary downside is the need for higher financial flexibility to afford the slightly increased payment amount regularly.
Is there a penalty for choosing accelerated bi-weekly payments?
Generally, there are no penalties for choosing this option, but it's important to confirm with your lender as terms can differ.
What happens if I miss an accelerated bi-weekly payment?
Missing a payment can lead to penalties and affect your loan terms, similar to other payment schedules. Always communicate with your lender in such cases.
Can I switch from bi-weekly to accelerated bi-weekly payments easily?
Switching depends on the lender's policy; some may allow easy transitions, while others might require a formal modification of the loan terms.
Can I make extra payments on a bi-weekly plan to mimic an accelerated one?
Yes, making extra payments on a bi-weekly schedule can effectively replicate the benefits of an accelerated plan.
Are accelerated bi-weekly payments more beneficial for long-term or short-term loans?
They are particularly beneficial for long-term loans like mortgages, as the savings on interest and reduction in term become more pronounced over time.
How do bi-weekly payments affect my budgeting compared to monthly payments?
Bi-weekly payments can make budgeting easier by aligning with pay periods for those paid every two weeks, though accelerated payments require careful financial planning.
How much faster can I pay off my mortgage with accelerated bi-weekly payments?
It can vary, but typically, accelerated bi-weekly payments can shorten the mortgage term by several years and save thousands in interest.
What's the main advantage of accelerated bi-weekly payments over bi-weekly?
The accelerated version significantly reduces the loan term and total interest paid by effectively making an extra month's payment annually.
Do all lenders offer accelerated bi-weekly payment options?
Most lenders offer some form of bi-weekly payment plan, but the availability and terms of accelerated options can vary.
Is there a difference in interest calculation between bi-weekly and accelerated bi-weekly payments?
The interest savings are greater with accelerated bi-weekly payments due to the additional amount applied to the principal.
Why don't all borrowers choose accelerated bi-weekly payments?
Not all borrowers choose this option due to budget constraints, lack of awareness, or preference for more flexibility in their payment schedule.
What should I consider before switching to an accelerated bi-weekly payment plan?
Consider your financial stability, the potential interest savings, loan term reduction, and any lender-specific terms or fees associated with changing your payment schedule.
How do I calculate the amount for accelerated bi-weekly payments?
Divide your monthly payment by two and then pay that amount every two weeks, leading to the equivalent of one extra monthly payment per year.
Can I change my payment plan from monthly to accelerated bi-weekly mid-loan?
Many lenders allow you to change your payment plan, but it may require a new agreement or modification of existing loan terms.
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Written by
Maham Liaqat
Co-written by
Urooj ArifUrooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
