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    • How much is your Debt really costing you?

      piggybank hole How much is your debt costing you? Often times, it's easy to get overwhelmed by making monthly payments on credit cards, but do you know how much your debt is actually costing you each year? Here is a simple calculation you can do in just minutes to show you exactly how costly your debts truly are.

      To figure your own debt costs, make a full lit of all of your debts, including bank loans, auto loans, credit card balances, student loans, (any thing that you make payments on that you are charged interest!).

      Beside each of those amounts, write down the interest rate that you pay for that particular debt. If you aren't sure what your interest rate is, it's imperative that you find out. To figure how much the debt is costing you per year, multiply the two numbers together.

      For example:
      1. Home Mortgage, $100,000 - Interest Rate 6% = $6,000. per year
      2. Visa Card $7,500 - Interest Rate 12% = $900. per year
      3. Car Loan $18,500 - Interest Rate 7% = $1,295. per year

      In this particular case, these 3 basic debts are costing $8,195 in interest alone each year. By writing out your debts and using this simple calculation, it's easy to see exactly where your money is going.
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      Comments 2 Comments
      1. drea's Avatar
        This is really basic concept, I don't know why I never thought of doing it before. I added up our debts and we are paying more than 50% of our income in just INTEREST every Year.

        No wonder we can never get ahead.
      1. 1onabudget's Avatar
        I hear you!! So now that we can calculate and see that we really wont be getting anywhere for a while with some of our debts....what now? Any advise? Is doing a debt consolidation loan a good idea?

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