To make a principal only payment, send the money through your servicer’s online portal, phone line, or mail with the amount clearly labeled as “principal only” or “additional principal.” If you don’t flag it that way, the servicer’s system will treat it as a regular installment and split it between interest and principal, which is not what you want. A few days later, log in and confirm the balance dropped by the full amount you paid and your next due date didn’t move forward.
Check Your Loan Contract First
Before sending any extra money, pull out your promissory note and the Truth in Lending disclosure that came with the loan. Federal law requires lenders to tell you upfront whether they charge a penalty for paying down the balance ahead of schedule.1Office of the Law Revision Counsel. 15 USC 1601 – Congressional Findings and Declaration of Purpose Look under the “Prepayment” heading. If no penalty is listed, you’re free to make extra payments whenever you want.
Where prepayment penalties exist, they can be steep. One common structure charges six months’ worth of interest if you pay off the loan within the first few years, which on a mortgage can reach several thousand dollars. Others charge a flat percentage of the remaining balance. The penalty typically only applies during the first three to five years of the loan.
Most mortgages originated today carry no prepayment penalty. Under the Dodd-Frank Act, any residential mortgage that isn’t a “qualified mortgage” can’t include one at all, and even qualified mortgages that do are capped at 2 percent of the prepaid balance in years one and two, 1 percent in year three, and nothing after that.2Office of the Law Revision Counsel. 15 USC 1639c – Minimum Standards for Residential Mortgage Transactions Adjustable-rate and higher-priced mortgage loans cannot carry prepayment penalties at all.3eCFR. 12 CFR 1026.43 – Minimum Standards for Transactions Secured by a Dwelling Federal student loans never charge prepayment penalties. Auto loans and personal loans vary more widely, so read the contract.
Submit the Payment Through Your Online Portal
Log in and go to the payment screen. Most portals have a dropdown or a separate field labeled “additional principal,” “extra principal,” or “principal only.” Select that instead of the standard monthly payment, enter the amount, and confirm. The receipt should show the payment type as a principal reduction. Save or screenshot it.
If you can’t find a principal-only option on the main payment screen, look for a secondary field below it. Some servicers let you enter a regular payment plus an additional principal amount on the same page. If neither option exists, don’t guess. Call the servicer before submitting anything. Paying through the wrong field is the single most common reason extra payments get misapplied.
Submit the Payment by Phone
Call customer service and tell the representative you want to make a principal-only payment. State the exact dollar amount and ask them to read back how the payment will be coded. Get a confirmation number before you hang up.
Some servicers charge a convenience fee for phone payments, anywhere from a few dollars up to $15 or more.4Consumer Financial Protection Bureau. What Is a Convenience Fee or Pay-to-Pay Fee Ask about the fee before authorizing the transaction so it doesn’t eat into the benefit.
Submit the Payment by Mail
If you pay by check, write “Principal Only” and your account number on the memo line. Many servicers use a separate mailing address for extra principal payments that differs from the address for regular monthly bills. Check your statement or the servicer’s website for the right one. Some lenders include a detachable principal payment coupon on paper statements with a checkbox or line for extra principal. Fill it out and include it with the check.
For proof of delivery, use Certified Mail with a Return Receipt. The 2026 USPS fee for Certified Mail is $5.30, plus $4.40 for a hard-copy return receipt or $2.82 for an electronic one, on top of regular postage.5United States Postal Service. Insurance and Extra Services That adds roughly $8 to $10 per payment, which makes more sense for a large one-time payment than for small recurring ones.
Student Loans Work Differently
Federal student loans allocate payments in a fixed order: outstanding fees first, then accrued interest, then principal.6Consumer Financial Protection Bureau. Tips for Paying Off Student Loans More Easily You can’t change that order. What you can control is which loan the extra money goes to and whether the servicer uses your overpayment to push your due date forward instead of reducing the balance.
If you have multiple federal student loans, the servicer will usually spread extra payments proportionally or apply them to the highest-interest-rate loan. You can override this by submitting special payment instructions directing the extra amount to a specific loan. Most servicers let you set this up online as a one-time or standing instruction. The CFPB recommends targeting your highest-interest-rate loans first.6Consumer Financial Protection Bureau. Tips for Paying Off Student Loans More Easily
Watch out for due date advancement. When you pay more than the amount due, many student loan servicers automatically push your next due date forward instead of simply reducing the principal. Your extra payment bought you time but didn’t accelerate payoff. Contact the servicer and explicitly request that extra payments reduce principal without advancing the due date. Some portals offer this as a toggle.
Set It Up to Repeat
One-time payments help, but the real power comes from consistency. Many servicers let you schedule a recurring extra principal payment through the online portal, either as a fixed monthly amount or a biweekly schedule. Look for an “autopay” or “recurring payment” option, and make sure the additional amount is tagged to principal, not just added onto the regular payment.
A biweekly schedule splits your monthly payment in half and pays that amount every two weeks. Because there are 52 weeks in a year, you make 26 half-payments, which equals 13 full monthly payments instead of 12. That one extra payment per year can cut several years off a 30-year mortgage. If your servicer doesn’t support biweekly payments directly, you can do the same thing by dividing one monthly payment by 12 and adding that amount as extra principal every month.
If you’ve made a large lump-sum principal payment, ask about a loan recast. Recasting recalculates your monthly payment based on the new, lower balance while keeping your original interest rate and remaining term, which lowers your monthly obligation permanently. Not all loans are eligible and servicers typically charge a processing fee, but it’s worth asking if you want cash flow relief rather than just a shorter term.
Verify the Payment Was Applied Correctly
Check your account a few business days after the payment posts. The transaction history should show the payment coded as a principal reduction, and the outstanding balance should have dropped by exactly the amount you paid. If it dropped by less, the servicer skimmed off interest first. If the next due date moved forward, the servicer processed it as a payment in advance rather than a principal reduction.
A due date that jumps ahead is the clearest sign of misapplication. If your payment was due June 1 and you made a $500 principal-only payment on May 15, your next due date should still be June 1. If it shifted to July 1, something went wrong. This mistake doesn’t save you any interest and defeats the purpose of the extra payment.
Review the next monthly statement to confirm the ending principal balance reflects the reduction. For a mortgage, you can also request an updated amortization schedule from the servicer showing the revised payoff date.
Fix a Misapplied Payment
If the payment was applied wrong and the servicer won’t fix it over the phone, mortgage borrowers have a formal dispute process. Federal regulations give you the right to submit a written notice of error. The notice needs your name, enough information to identify your loan, and a description of the error.7eCFR. 12 CFR 1024.35 – Error Resolution Procedures Send it to the address the servicer designates for disputes, not the general payment address. A note scribbled on a payment coupon doesn’t count.
The servicer has to acknowledge your notice in writing within five business days. It then has 30 business days to investigate and either correct the error or explain why it believes the payment was applied correctly. The servicer can extend that deadline by 15 business days if it notifies you in writing before the original deadline expires.7eCFR. 12 CFR 1024.35 – Error Resolution Procedures
If that still doesn’t resolve it, file a complaint with the Consumer Financial Protection Bureau online or by calling (855) 411-CFPB.8Consumer Financial Protection Bureau. How Do I Dispute an Error or Request Information About My Mortgage The CFPB forwards complaints to the servicer and tracks the response, and that outside pressure often resolves disputes that stalled at the customer service level.