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Oh, you’ll pay! Interest, that is.

Doesn’t it seem like the word ‘interest’, along with most of the good curse words, has lost most of its scariness?  I’m not talking in terms of, “how interesting;” unless Hannibal Lecter is saying it, that’s not that scary.  I’m talking in, “you’ll have to pay me back with interest,” kind of terms (Oooo, did you just get the shivers?  Me too).  Considering the definition, according to Merriam-Webster, interest should give all frugally-minded people the heebie-jeebies:

http://diebrueder.ch/piskodral/1928

Main Entry: 1in·ter·est

Pronunciation: \ˈin-t(ə-)rəst; ˈin-tə-ˌrest, –ˌtrest; ˈin-tərst\

Function: noun

flirter avec une fille en couple 2 a : a rencontre femme vendôme charge for borrowed money generally a percentage of the amount borrowed … c : an mujer madura busca sexo gratis excess above what is due or expected.

The key terms here being ‘excess’ and ‘charge’.  Excess charge?  Why, I believe that sounds an awful lot like a fee.  Just mention the word ‘fee,’ and you’ll send people running like somebody yelled, “FREE T-SHIRTS!”  People will spend hours on the phone trying to get an annual fee taken off of their credit card (just ask my dad; hi Dad!), but will continue paying interest on that very same card. 


Interest is a big deal.  In 2009 Americans paid lieux rencontres 89 $216.8 BILLION of it, rencontres ldc not including mortgage interest.  For a population of 305 million, that’s about cherche jeune femme avisГ©e sophie jomain epub $711/person.  Bummer.


Everyone knows about interest, but many people still aren’t thinking about it.  Here is a look at three high-interest expenses, with the aim to increase awareness and to re-instill the SCARY in interest.  Buwahaha!


 


Credit Cards


First off, take a look at the Lifetime Credit Card Cost Calculator.  Experiment with different interest rates and periods to see how much interest can add up on items from flat-screens to cheeseburgers.  Talk about a good time.


Now, Husband and I like to put most of our purchases on our credit cards and then pay them off completely at the end of the month.  Our statements, however, give us different scenarios in which we have the option to choose our own debt adventures. 


The first option tells us how long and how much it would take to pay off our current card balance (with no additions), http://www.sru-lika-gospic.com/plemjanik/gigabet/5571 only making the minimum payment; a $2,000 balance, for example, would take about 13 years to pay off and cost close to $900 in interest.  Pay for today’s groceries 13 years from now?  That makes zero sense to me.   


The second option tells us how much we would need to pay per month to pay the balance off in just three years; $60/month for a $2,000 balance.


Credit-Card 
13% interest one time might not matter so much (don’t get me wrong, it would matter to me), but that assumes that you wouldn’t purchase anything else that would add to the balance.  Unfortunately, that’s not the case for most minimum-payment-payers. 


Auto Loans


Consider a fully-financed, $0 down-payment, $25,000 new car at the best interest rate I could find: 3.99%.


Auto 


If $1 can grow to $10, then $2,089 can grow to over $19,000 (assuming: 30 years, 8% annual growth).  It’s certainly worth:

  • shopping around for better rates
  • considering cheaper cars
  • saving to make a larger down payment


Mortgages


I am pro mortgage.  I plan on having a mortgage someday.  Mortgages have nice tax deductions.  However, a mortgage will likely (hopefully) include the most interest you will ever pay during your lifetime. 


The 30-Year Mortgage: 


30yr 


The 15-Year Mortgage:

15yr

 


 


Nerds, here is the spreadsheet so you can do your own calculations: Download Interest



Article publié pour la première fois le 25/08/2010

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