What Will Interest Cost You
Do you have loans or credit card debt? So you have heard about interest?
Regarding interest, it is the money charged or given as part of a debt. When you borrow money, you will pay interest. On the other hand, lenders will earn interest to use their money or funds.
High interest rates can lead to substantial costs if paid off slowly. If you are in debt, you should pay the debt off as soon as possible.
The cost of interest can accumulate and make borrowing more expensive than the item or service you bought. Therefore, paying interest doesn’t benefit you or improve the product or service. It is important to avoid debt.
What Will Interest Cost You?
Putting a price tag on what interest will cost you is impossible because we all use debt differently. But be sure of this: paying interest doesn’t improve the value of the item you bought or the quality of your life.
Benefits Of Being Debt-Free
You can avoid the problem of expensive interest if you don’t use debt. Here are the benefits of being debt-free.
First, it provides financial freedom. If you have no debt, you have the control of your money. You can spend it, especially on things that are important to you, and save money.
Lower your cost of living. Debts or loans are some reasons people have a high cost of living. Imagine you receive your salary; instead of spending only on your necessities, you must also pay debts, leaving you less money to spend on you and your family.
Being debt-free makes your paycheck more sustainable. The portion of your income that is supposed to be allotted to a debt will be saved for your needs. Therefore, you will not run out of money because you are not paying debts monthly.
In this article, we will talk about “What will interest cost you.” Also, how to live within your means and how to sustain living below your means.
This article will be helpful and become a guide to living within your means to avoid having debt.
Keep reading!
Credit Card Debt
Credit cards are easy to use, but at the same time, it is easy to abuse. Need to know why? Read below.
You don’t need money to buy. Instead, you use the plastic money to buy and pay it off later. However, you may be tempted to overspend if you have credit cards. According to the Paytm Blog (June 23, 2023), since credit cards offer you credit to a large extent, there may be instances where you make unnecessary purchases of the available limit and fall into a debt trap later.
Another is you pay interest. Credit card companies charge you interest if you cannot pay each month on time and in full. So, you need to pay the charges before the end of the billing cycle.
You need to use self-discipline to avoid impulse buying and misuse. Self-discipline is the key to avoiding overspending on unimportant things. Also, do not misuse your credit card. As said by Paytm Blog (June 23, 2023), Buying with a credit card is the right choice if used effectively.
Stop abusing your credit cards.
Suppose you have a credit card balance of $5,000 with an annual interest rate of 20%. Then, paying $200 a month will take two years and nine months to pay off the balance. The total interest is $1521.71. Therefore, that’s $1521.71 you could have spent on something you wanted.
Car Loan
Having a car is what anyone is dreaming of. Since you want a car and have no money to buy it, you can get a loan if you finance a car with a loan of $25,000 at an interest rate of 5% for five years. You will pay $471.78 monthly and must pay off the balance in 5 years. The total interest is $3,306.85.
If you secure a loan, you can buy a car, but you are also enduring the interest that the company charges you. Don’t use loans; save money and be patient because, in the end, it will be worth it.
Mortgage
A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money you’ve borrowed plus interest, as defined by the Consumer Financial Protection Bureau.
For a mortgage of $300,000 with a 30-year loan and an interest rate of 4%, the interest paid over the life of the loan can exceed $200,000. This means you’ll pay more than double the original loan amount. The lending company earns a lot of money from you.
Paying Interest Is Expensive
If I have said it once, I’ve said it a million times: paying interest is expensive. The money supposed to be for your other needs will be spent on paying interest. So what’s left for you? Not much!!!
Paying interest doesn’t add quality to your life. It won’t give you happiness, peace of mind, and financial security.
Paying interest does the opposite; it detracts from your life because you have nothing in return for the money you spend. You will remain financially unstable while the company enjoys the benefit it can get from the interest it charges you.
Buying Without Paying Interest
To avoid paying interest, pay cash instead of using a credit card. Sometimes, paying cash is impossible, but there is a way to help you lower your cost of living. Pay your loans and credit cards off as soon as you can.
According to PrimeWay Federal Credit Union, when you pay with the cash you’ve budgeted for purchases, it’s easier to track exactly how you spend your money. It’s also an eye-opener as to how much money is going out vs. coming in from week to week or month to month. Therefore, if you want to save, pay cash instead.
Sometimes, Credit Is Necessary
If you plan to buy a house, how many years would you have to save And pay rent? Saving money to buy a house and paying rent simultaneously, purchasing a home could take many years.
It may be wise to secure a loan, buy the house, and no longer pay rent.
Just be wise and pay off the debt as quickly as possible.
Credit cards are good if we use credit wisely. Don’t use them like cash. Avoid paying interest and pay the balance off before each billing cycle.
If you need to borrow money:
- Accelerate your payments to become debt-free quickly and pay less interest.
- Don’t wait for the due date; pay your debts as early as possible if you have money.
- Don’t wait to pay your bill before you take action; avoid problems as much as possible.
We should pay with cash or a debit card. In this way, we can save on interest and keep more money. You should not pay your living expenses with credit; pay cash instead to save for upcoming events and things.
Live Within Your Means
How is it important to live within your means? There are lots of benefits you can get from living within your means.
It is important to live on less than you earn; why? If you are living that way, it will help you avoid debts or loans. Having debts will result in paying interest. What will interest cost you? It will cost you a lot.
Also, living on less than you earn can help you save money for other important things like a new house and saving for a vacation.
Aside from living within your means, you should also set financial goals. As Forbes wrote on February 22, 2023, Setting financial goals is an effective way to build wealth, provide direction and purpose, and keep you on track to achieve financial success. Establishing financial goals can also motivate and inspire you, as it allows for measurable steps.
Therefore, it is important to save for your financial goals because you are the one who will benefit from this.
Live within your means to have a debt-free life!
Living debt-free is living with happiness.
Conclusion
Before engaging in debts, you must think twice about how these debts will lead to paying interest and “What will interest cost you?”. If you have no debt, you won’t pay any interest; you will have a lot of advantages with your finances. Being debt-free means having financial freedom; you can control your money and use it however you want. There is more disposable income that will come into your pocket; either you spend or save it. Having no debts can lower your cost of living, and it makes your paycheck more sustainable. Therefore, you will not run out of money and be able to survive at the end of the month.
Live within your means and set financial goals to avoid having debts and paying interest.