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What Increases Your Total Loan Balance?

 What Increases Your Total Loan Balance? The interest rate on your student loans is the most obvious part of your total loan balance. However, other factors can increase it. Understanding what increases your total loan balance can help you make better choices as you repay your loans and prepare for life after graduation.

What Increases Your Total Loan Balance?

It’s a common misconception that you can only increase your total loan balance by making additional payments. In reality, there are five ways to increase your total amount owed on student loans:

  • Interest. When you borrow money from a financial institution, such as a bank or credit union, they charge interest on the money you owe them. The amount of interest you pay increases over time as interest accrues while you’re still in school (for federal student loans) or after graduation (for private student loans).
  • Failing to pay interest. If you’ve been charged with failing to make timely payments on your federal loan debt and are in default on that debt for at least 270 days, then your lender will report this information to credit bureaus so it can negatively impact both your credit score and ability to get future loans—and even get employment!
  • Applying excess funds towards principal instead of accrued interest during repayment plans. This is extremely beneficial if it means working toward paying off larger chunks of principal sooner rather than later!

This option is available for all three types of repayment plans: standard 10-year plan; extended 25-year plan; income-driven repayment plan (IDR) where monthly payments depend upon income or family size

Paying Interest

Interest is the price of borrowing money, and it’s calculated on the principal balance. When you pay off your loan in full, interest doesn’t apply because there isn’t any principal left to charge interest on.

However, if you don’t repay all of your loan in one go and instead make monthly payments over time (a process known as “amortizing”), then interest will be charged each time you make payment. That means that when you start paying back an installment plan or balance transfer agreement with accrued interest, it will show up as part of your new total loan balance.

Failing to Pay Interest

  • When you don’t pay interest, you’re not only missing out on the benefit of lower monthly payments—you’re also paying more money back in the end.
  • The longer your loan term is, the more interest will accrue over time. So if you take out a 30-year mortgage instead of a 15-year mortgage, for example, your total loan balance will increase because it takes longer to pay back that same amount of principal (the original amount borrowed).

Applying Excess Funds Towards the Principal

If you have some excess funds and want to reduce your loan balance, apply those extra funds toward your principal. This will save you money in the long run.

If you’re going to be paying back your loan over a long period, applying excess funds towards the principal is probably one of the best ways to do so. The longer it takes for you to pay off a given amount of debt (like a student loan), the more interest accrues on that debt amount until it reaches its full balance. Continuously applying excess funds towards your principal, means less interest will accrue because less time has passed since the date that these payments were made.

Read alsoWhat Is a Home Equity Loan?

Understanding what increases your total loan balance can help you make better choices.

Understanding what increases your total loan balance can help you make better choices.

  • Paying interest on a loan increases your total loan balance because the amount of money owed goes up.
  • Failing to pay interest will result in an increase in your total loan balance because the amount of money owed goes up.
  • Applying excess funds towards the principal (the original amount borrowed) will decrease your total loan balance because the amount owed goes down, but only temporarily—if these payments are not continued indefinitely, then eventually they too would become “past due” and increase again.

So what does this mean for you? It means that if you plan on paying off your student loans early, it’s essential not only to have a solid financial plan and enough cash on hand so that there isn’t a worry about making ends meet while waiting until graduation day before earning much more income; but also so that while paying off those loans in full ahead-of-schedule won’t trigger any penalties or add extra interest charges into their already sizeable balances (or get behind enough where those fees start piling up again).

Top Best Loan Companies

While we do our best to provide accurate information, there may be changes to this loan program. Be sure to confirm the terms of any loan you are considering before finalizing your decision.

Best Egg

Best Egg is a peer-to-peer lending marketplace that connects investors with borrowers. It is one of the best companies that give loans to people who need money. Best Egg offers personal loans, home equity loans, and business loans.


Prosper is a peer-to-peer lending company that has been in business since 2006. The company has funded over $9 billion in loans and is the largest marketplace lender in the United States. Prosper operates under three different legal entities: Prosper Marketplace Inc, P2P Funding LLC, and Prosper Funding Services Inc.

Prosper offers personal loans for individuals who are looking for debt consolidation or an extra cash infusion to pay off their credit cards, medical bills, or other high-interest debts. Loans range from $2,000 to $35,000 with terms of 36 months and no prepayment penalty fees.

Lending Club

Lending Club is a peer-to-peer lending platform that allows individuals to borrow money from other individuals. It’s one of the most trusted peer-to-peer lenders in the U.S. and offers personal loans, business loans, and student loans.

Personal Loans

Lending Club has a variety of personal loan options for borrowers looking for a range of loan amounts (from $1,000 to $35,000) at interest rates ranging from 6.95% APR to 36% APR depending on your credit score and debt-to-income ratio. Business Loans

Lending Club also offers business loans up to $100,000 at fixed rates starting at 5% APR with no ongoing fees or prepayment penalties

Quicken Loans

Quicken Loans is a direct lender that has been in business since 1985. The company was founded by Dan Gilbert and has received numerous awards over the years, including being named one of America’s Most Admired Companies by Fortune Magazine for six consecutive years. Quicken Loans operates more than 1,000 branch locations across the United States and offers online lending services as well.


Avant is a personal loan marketplace that allows consumers to apply for loans online and get matched with the best lender for their needs. Avant is a good option for borrowers who have a poor or limited credit history or who have been denied by other lenders.

Avant offers personal loans between $3,000 and $35,000 and up to 36 months of fixed or variable interest rates, depending on your personal credit profile. You can choose both fixed-rate and variable-rate options depending on your needs; however, note that some lenders may be more stringent when evaluating applications with high-risk profiles such as students who do not have established credit histories yet but need funds quickly (e.g., tuition payments). For example, the maximum APR offered by Lending Club with an excellent FICO score range from 5% – 35%, while Prosper’s APRs vary between 7% – 36%.

Citizens Bank

Citizens Bank offers a variety of loan options for consumers, including everything from personal loans to auto loans and mortgage products.

Citizens Bank is one of the best banks in America, with over 7 million customers across the country. The bank was founded in 1828 and has been growing ever since. Today they have branches in every state except Hawaii and Alaska, making them one of the most accessible banks around. Citizens Bank also offers home equity loans that are available nationwide through their website or an authorized loan officer at any branch location (or both).


Discover is a good option for borrowers who need a low rate and want to apply online. It’s not the best option for everyone, but it’s certainly worth considering if you’re looking for a loan from one of the largest banks in the U.S., with more than 70 million customers across several different countries.

If you want an easy way to pay back your student debt or consolidate other debts into one monthly payment, Discover Personal Loans may be able to help. The process is fast and easy: just fill out an application online (or call 800-347-3085) after reviewing their rates online first (link). Once approved, you’ll receive funds quickly through direct deposit or check delivery within 24 hours (link).

Marcus by Goldman Sachs

Marcus by Goldman Sachs is a personal loan company that offers a variety of personal loan options. You can apply for Marcus by Goldman Sachs using the online application form or by calling their toll-free number.

Marcus by Goldman Sachs offers some of the best interest rates on personal loans, so it’s great if you need to make high payments. To get started, you’ll need to meet their minimum eligibility requirements: You must be at least 18 years old and have an active bank account with direct deposit capabilities. Once approved, you’ll receive your funds within 1 business day through ACH transfer or paper check delivery (your choice). is a direct lender, which means that the company extends loans to borrowers directly and does not go through a third party (such as a bank or credit union).

Personal loans are available from $1,000 to $35,000 and are unsecured. This means they lack collateral such as real estate or stocks as security for the loan. Unsecured personal loans may have higher interest rates than secured ones because of this lack of collateral; however, they can be a good option in certain circumstances—for instance, if you need to borrow money for an emergency expense but don’t own property that could serve as collateral for your loan.

Personal loans have fixed rates and fixed payments over 12 months; there are no prepayment penalties if you decide to pay off your balance before the end of that term.


In the end, it’s important to understand what increases your total loan balance and how that impacts your payments. You can use this knowledge to make better decisions about how you use credit and pay off debt.