Is this normal? (Interest on HELOC)

[bjscheel]

I pay extra on debts when I can. When I pay extra on my mortgage, it applies the regular monthly payment amount to the principal and interest due on the bill. All extra goes toward principal.

When I pay extra on the HELOC, they charge me interest from the billing date (the 10th) to the payment received date, in addition to the interest due on the statement. If I pay enough extra, it starts to apply to principal. As I look at it, I do see that then the next month my interest is less because instead of calculating it from the 10th to the 10th, it only has interest from the date of payment to the 10th, because I have now already paid the interest from the 10th to say the 20th.

Is this benefitting me about as much as if all extra were put on principal, or am I getting a worse deal? Is this normal, or is it more normal to have it like my mortgage where all extra is toward principal?

 

[timmac]

Mathematically, it sounds like that is benefiting you more than if it just applied directly to the principal. That said, the difference between the two (unless we are talking about a very large payment) is quite minimal. (and equal to the interest that would compound on the portion of the interest that was paid early)

 

[bjscheel]

Thanks, you are right. At first this was disconcerting- especially months when I didn't pay much extra and didn't see any of it go toward principal so it looked like all my extra was just for nothing- but as I was typing my OP I started to figure it out.