How many monthly payments are there in a bi-weekly payment plan?

How many monthly payments are there in a bi-weekly payment plan?

• A. 12
• B. 11
• C. 15
• D. 13

Answer: (D)

In a bi-weekly payment plan, payments are made every two weeks, which leads to a unique calculation of total payments over the course of a year. Normally, if someone pays monthly, they would make 12 payments each year. However, in a bi-weekly plan, there are 52 weeks in a year, and when you divide that by 2 for bi-weekly payments, it results in 26 payment periods. When these bi-weekly payments are calculated, this means that in a year, there are actually 13 full monthly equivalents of payment. This occurs because each of the 26 bi-weekly payments contributes slightly more towards the principal and interest than a standard monthly payment would. Thus, a borrower making bi-weekly payments ends up making 13 payments equivalent to a full monthly payment each year. This is important for consumers to understand, as this structure can lead to a faster amortization schedule and potentially save money on interest over the life of the loan.

In a bi-weekly payment plan, payments are made every two weeks, which leads to a unique calculation of total payments over the course of a year. Normally, if someone pays monthly, they would make 12 payments each year. However, in a bi-weekly plan, there are 52 weeks in a year, and when you divide that by 2 for bi-weekly payments, it results in 26 payment periods.

When these bi-weekly payments are calculated, this means that in a year, there are actually 13 full monthly equivalents of payment. This occurs because each of the 26 bi-weekly payments contributes slightly more towards the principal and interest than a standard monthly payment would.

Thus, a borrower making bi-weekly payments ends up making 13 payments equivalent to a full monthly payment each year. This is important for consumers to understand, as this structure can lead to a faster amortization schedule and potentially save money on interest over the life of the loan.