Transcript

The Real Cost of Your Debt

credit sesame THE REAL COST BY: www.creditsesame.com OF YOUR DEBT I Do you know what it really costs to finance your life? If you, like most Americans, must borrow in order to achieve your goals - whether that's buying a home, a new car or getting a college degree - the monthly payments and interest rates are far from the only factors you must consider. Your cash flow, the terms of your loans and your own debt management behavior must all play a role in your borrowing decisions. THE REAL COST OF YOUR HOME $176,900 ÁVERAGE HOME PRICE THE REAL COST: THE REAL COST: FIXED 30 YR $317,963 5/1 ARM 30 YR $335,468 TOTAL INTEREST PAID: TOTAL INTEREST PAID: When it comes to financing your home, the fixed mortgages may not be the best option. To calculate the real cost of a loan, consider how frequently loan rates adjust how long you will stay in your home and your overall economic outlook (like how your salary can be expected to change over time.) $141,063 $158,568 MONTHLY PAYMENT: STARTING MONTHLY PAYMENT: $883.24 $757.80 Interest Rate: 4.375% Initial Interest Rate: 3.125% *the real cost includes the price of your home + plus interest over 30 years. TOTAL CUMULATIVE PAYMENTS MADE $ THOUSANDS 400 350 $335,468 300 $271,029 $317,963 = FIXED MORTGAGE = ARM MORTGAGE ASSUMPTIVE CHANGE UP TO 9.38% 250 $264,972 200 $158,983 150 $105,988 $149,220 100 $52,994 $94,580 $31,796 50 $45,468 $10,598 $27,280 $9,093 1 yг З уг 5 yr 10 yг 15 yг 25 yг 30 yr 1YR ARM SAVES 3YR ARM SAVES 5YR ARM SAVES 10YR ARM SAVES 15YR ARM SAVES 25YR FIXED SAVES 30YR FIXED SAVES $11,408 OVER FIXED $1,505 OVER FIXED $4,516 OVER FIXED $7,526 OVER FIXED $9,763 OVER FIXED $6,057 OVER ARM $17,505 OVER ARM THE REAL COST OF YOUR CAR $25,439 ÅVERAGE PRICE PAID FOR A 2010 VOLKSWAGEN PASSAT CUMULATIVE INTEREST ACCRUED $ THOUSANDS Buying a car and understanding the terms of a loan can be con- fusing. Financing a car for a longer term usually means lower monthly payments, but in the long run it will cost you more because of higher interest rates and because you will be paying interest for a longer period of time. 3.5 $3,226 $2,999 =48 MO 3 =36 MO $2,371 $2,384 2.5 FIXED THE REAL COT: 36 MO $27,823 FIXED THE REAL COST: $2,094 48 MO $28,665 TOTAL INTEREST PAID: TOTAL INTEREST PAID: $1,363 $1,289 1.5 $3,226 $2,384 MONTHLY PAYMENT: MONTHLY PAYMENT: $597.20 $772.87 .5 Interest Rate: 5.98% Interest Rate: 5.91% 1 yr 2yr 3yг 4уr THE REAL COST OF COLLEGE CUMULATIVE INTEREST ACCRUED $28,000 Four Years Tuition at Public University $ THOUSANDS 20 17.5 $16,739 Textbooks and groceries aren't the only expenses a college student faces. Most people need student loans--and that means paying interest that often adds up to more than one year's tuition. =STAFFORD LOAN $14,438 15 =CITI LOAN 12.5 ASSUMPTIVE $10,123 STAFFORD THE REAL COST: 15 YR CITI LOAN THE REAL COST: CHANGE 10 $44,739 15 YR $37,956 UP TO 6.31% $8,511 $8,403 7.5 TOTAL INTEREST PAID: TOTAL INTEREST PAID: $16,739 $10,123 $4,725 MONTHLY PAYMENT: STARTING MONTHLY PAYMENT: $248.55 $205.36 Initial Interest Rate: 3.81% $1,869 2.5 $1,060 Interest Rate: 6.8%* 1 yr 5 yr 10 yr 15 yr *Stafford Loan Type (Extended/Unsubsidized): based on even monthly payment over a 12-30 year period. 15 year duration selected for comparison, THE REAL COST OF YOUR CREDIT CARD DEBT $1,999 60" Samsung Flat Screen TV CUMULATIVE INTEREST ACCRUED $THOUSANDS With average credit card interest rates now exceeding 14%, you may want to avoid buying that new TV on credit unless you are absolutely sure that you can pay that balance off in full when the bill comes due. If you only make the minimum payment each month, you may be paying off that TV for the next 14 years. 2.0 $1,833 1.75 =MIN +1% $1,634 1.5 = MIN +5% MIN THE REAL COST: +1% $3,832 MIN THE REAL COST: 1.25 +5% $2,560 $1056 TOTAL INTEREST PAID: TOTAL INTEREST PAID: $1,833 $561 75 $561 MONTHLY PAYMENT: MONTHLY PAYMENT: $43.33 Interest Rate: 14% $100 Interest Rate: 14% $265 $227 1 yr 5 yr 10 yr 14 yr PAID IN FÜLL 6 yrs PAID IN FULL 14.1 yrs Sources: bankrate.com I occ.treas.gov I The National Association of Realtors I truecar.com I collegeboard.com I citibank.com I bestbuy.com I estudentloan.com I student.oan.com

The Real Cost of Your Debt

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The debt you carry is not simply made up of your monthly payments and interest rates. Many other factors should be considered when you think about the real cost of your debt, including your cash flow,...

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