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I have 5 loans with different interest rates through Great lakes. I have set it up so that extra payments go to the loans with the highest interest rates. Is this a good strategy or should I set it up so that the extra payments are spread out over all 5 loans?
Great question! You’re making the right choice. Your extra payments should definitely go to your highest interest loan first. That’s the most efficient use of your extra payment and will save you the most money.
On the Great Lakes website they define their standard process for excess payments to your account. They apply excess payments first to any accrued interest (interest since your last payment) then apply the remainder to your highest interest loan first. It looks like Great Lakes will indicate on your account that you are “paid ahead” even though they’re applying your extra payments to principal.
Great Lakes also indicates that you can set up a custom allocation.
Here’s the link to the FAQ on the Great Lakes website with more details. https://mygreatlakes.org/
Essentially, unless you’ve elected a custom allocation your extra payments should be being applied in the way that will save you the most money!
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