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Repaying Debt

REPAYING DEBT CREDIT CARDS $ LOANS $ MORTGAGE VSVI CREDIT CARD INSTALLMENT VS LOAN The Best Way to Borrow Depends on Your Goals Lower monthly payment or lower amount of interest paid $5,000 in credit card debt at national average $5,000 installment loan at 15.5%: of 15.5%: • Monthly (minimum) payment: 4% of balance (can start at $200/month, • Monthly payment: $174.55 (stays flat) but decreases with each payment) Time to pay in full with just minimum payments: 124 months (10 years, 4 • Time to pay in full: 36 months (3 years) months) Total Interest = $2,286 Total Interest = $1,283.92 Effect of Extra Payments Paying extra on your credit card debt can go a long way. If you paid an extra $50 each month on the $5,000 at 15.5%: Monthly (minimum) payment: 4% of balance, plus $50 Time to pay in full: Less than 18 months (can save you nearly 8 years!) Total Interest = $832 Saves You $1,497 Short-Term vs. Longer-Term The length of time it takes to pay a debt, or “term," can make a huge difference, especially in your monthly payment. Here, the difference in monthly payment is more than 50%. • $5,000 loan for 3 • $5,000 loan for 5 years at 10% years at 10% VS • Monthly payment: • Monthly payment: $161.34 $106.24 Total Interest = $808.09 Total Interest = $1,374 30 15 30-YEARS vs 15-YEARS A difference in a debt's term not only affects monthly payments–interest paid is also affected. This is especially true when comparing 30- and 15-year mortgages. While 15-year mortgages sometimes have lower rates, they also tend to come with higher monthly payments. But look at the difference in interest costs. • $150,000 for 30 years, fixed rate at 5% • $150,000 for 15 years, fixed rate at 3% VS • Monthly payment: (with est. taxes, insurance, etc.): • Monthly payment: (with est. taxes, insurance, etc.): $1,065 Total Interest = $139,884 $1,295 Total Interest = $36,457 %3D %3D NOTE: All figures presented above are payment estimates based on the use of calculators at For illustrative PIONEER P SERVICES purposes only. The borrowing option that is best for you will depend on your own unique financial situation. Division MidCountry Bank CREDIT CARD

Repaying Debt

shared by PioneerServices on Mar 19
There are many options out there for borrowing money, but which ones take the longest to pay off? How much total interest will you pay? What if you pay a bit more each month—does it really matter? T...


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