How much is your Debt really costing you?
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.
- Home Mortgage, $100,000 - Interest Rate 6% = $6,000. per year
- Visa Card $7,500 - Interest Rate 12% = $900. per year
- 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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