The Big Payoff

It’s not just about how much interest you’ll save. Many people don’t realise how paying even just a small amount more each month, can dramatically shorten the term of a loan or how long it takes to pay off credit. That frees up time and money to do something else and of course relieves the burden of debt hanging over your head sooner! Nice.

We’ve given you four debt examples below ($1,000 / $5,000 / $20,000 / $300,000), to show you how much faster they could be paid off:

$1,000 Credit Card Debt

Based on 19% interest rate & minimum monthly payment 3% of the balance (or $30 per month):

• It would take FOUR years to pay the credit card off!
• Interest paid = $432 - nearly half the original debt

By paying just $50 more per month:

• Paid off in TWO years - half the time!
• Interest paid = $211 - saving $221

$5,000 Loan

Based on Three Year Term & 14% Interest Rate:

• Minimum monthly payment = $171
• Interest paid = $1,152

By paying just $100 more per month ($271):

• Paid off in 20 months which is 16 months less!
• Interest paid = $648 - saving $504

$20,000 Loan

Based on 5 Year Term & 15% Interest Rate:

• Minimum monthly payment = $476
• Total Interest = $8,550 - close to half the original loan amount

By paying just $134 more per month ($600):

• Paid off in 3.5 years - 1.5 years less!
• Total interest = $6,000 - saving $2,550

$300,000 Mortgage (Home Loan)

Based on 30 Year Term & 4.5% Interest Rate:

• Minimum monthly payment = $1,520
• Interest paid = $247,000 - a total of $547,000 paid over 30 years

By paying just $200 more per month ($1,720):

• Paid off in 23.5 years - 6.5 years less!
• Interest paid = $187,000 - saving $60,000

Note: We always recommend that first you save money for possible ‘financial shocks’ in the future. THEN spare cash or extra savings can be used to pay off debt faster.

See our Blog Post: Avoid Nasty Financial Shocks