POWER DOWN YOUR DEBT (4)
by adminFrom this report, we can see that Mark and Joyce have six debts, totaling $132,000. If they were to pay all six of their debts using a monthly minimum payment, they will pay an additional $174,451 in interest, bringing their actual total to $306,465! That’s nearly two and a half times what they borrowed!
Unfortunately, most people don’t realize that when the initial loan
amount is combined with compound interest, a person can end up paying up to three times the amount they actually borrow! This bears repeating:
When you accumulate debt, you can end up paying
up to three times the amount you actually borrow!
Credit card companies and other credit issuers thoroughly understand
this fact. They know that compound interest is the way to make money. That’s why they send out more than 3.54 billion offers for new credit cards each year, even to those with bad credit or to those who have declared bankruptcy. Unless you more fully understand the power that compound interest can have over you, you will fall victim to credit card companies, lending institutions, banks, and other entities that wait with bated breath to put to work for them the compound interest they collect from you.
David and Wendy* are a good example of how compound interest can
ruin a family financially. This couple had 18 credit cards and thought nothing of using them to pay for everything, even groceries. When asked how much they owed on their cards, Wendy said quickly, “Around $17,000.” But David said, “No, I pay the bills, and it’s around $22,000 to $24,000.” When we finished adding up all their credit card debt, it was more than $47,000! They were shocked and completely unaware their debt was so high. Their interest expense alone to service these debts was $950 a month! They had to earn $1,450 each month so that after taxes they would have the $950 left
just to pay the interest.
Taken from : Money Mastery “10 Principles That Will Change
Your Financial Life Forever
