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 BankRate.com. 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
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