Pigeon payments are useful when you have a bill that needs to constantly pecked down in size. Items like a credit card or an item on layaway.
Pigeoning is the term for paying down a bill by pecking away at it with small continual payments known as pecking. This works well with banking relationships that have both your debt and your everyday banking online. Credit unions are really the best fit for pigeon payments because you can do an automatic transfer of just a few bucks out of everyday cash flow that start to add up over time.
Some people try to use pigeon style payments to build savings, but that is really a technique called kindling ( the idea of putting many small twigs together to start a fire) or they use the savings that they got from one place and push it into savings and that is a different technique called cross investing.
Richchicks Weblog 
Posted by Kate on April 19, 2010 at 3:57 pm
I like this!
I may start working on this for my second mortgage.
Just a few bucks when I have it.
Posted by RICH CHICKS on April 19, 2010 at 4:07 pm
Kate,
Since you are a waitress I know you have a bunch of spare change that you cash in at the end of the night. Try taking one night a weeks CHANGE from all your tips and adding it to the payment. Do that for four weeks and calculate the realized savings.
Here is how to do an oversimplified equation on REALIZED SAVINGS- this is not a compounding interest equation. But it is good enough for our purposes.
Every dollar you pay down saves you that amount of interest a year.
So a 7% second mortgage has a $.07 a year on every dollar
AND here is the yummy part!
Depending on how many YEARS you paid the dollar ahead it saves you that every year you have left on the note.
A dollar paid ten years ahead saves $.70 over the loan
A dollar paid 20 years ahead saves your $1.40 over the loan
A dollar paid 30 years ahead saves you $2.10 over the loan
Keep us posted!