As we continued on the quest to understand credit and lending yesterday, Mark summed up the most important element of the week - the importance of getting your high interest debt paid off.
I ran a little calculation that surprised even me.
If you had a credit card with a balance of $10,000 for example with a rate of 28% (which isn't unusual for a department store or some other credit cards), paying only the minimum payment of $275 per month, it would take you 51 years and 9 months to pay the balance off. Plus, it would cost you $44,565.03 in total interest charges by the time you were done - if you lived that long! If that doesn't shock you as much as it did me, this will hopefully open your eyes further.
If you simply paid just $25 more per month, increasing your payment to $300, you would have that same balance paid off in just 5 years and 2 months and just $8,564.60 in interest (still a whopping amount but more palatable compared to $40K plus!).
I was surprised that if you increased your payment to $50 more per month, relatively speaking, it didn't make as significant of an impact as the $25 more vs. just the minimum payment. However, every dollar does count! If you increased your payment to $325 per month, that balance would be paid in 4 years, 5 months with the total interest cost of $7,039.77.
If you'd like to calculate how quickly you too can become debt free with this very handy CNN Money calculator that I found on the net and used for the above examples, just visit my website at www.kelleykeehn.com and click on the CBC logo on the left side. You'll find this resource and many others to assist you in your journey to becoming debt free!