Which of the following statements is TRUE if you increase your monthly payment above the required loan payment?
A) The extra portion of the payment does not go to the principal.
B) You can significantly increase the number of payments needed to pay off the loan.
C) The extra portion of the payment increases the principal.
D) You can significantly reduce the number of payments needed to pay off the loan.
Answer: D
Explanation: D) If you increase your monthly payment above the required loan payment, then the additional portion of the payment goes to the principal. The interesting thing about an extra payment above the required annuity is that it can appreciably reduce the number of payments needed to pay off the loan.
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