By: Dan Cavalli Business and Money Strategist
Many people dream of being debt free. You might also have dreams of one day being debt free. But do you know when that day is going to happen? Do you realize that you have complete control over how long it takes you to become debt free? With a minimal amount of money each month you can drastically change your timeline for getting rid of your debt burden. In this article, we are going to look at three main debts that you probably have: mortgage, auto and credit card. We will figure up how long it will take you to pay off your debt and devise strategies for paying off that debt sooner. Let’s get started, shall we?
Mortgage – Your mortgage payment is probably your largest expense. If you have a $100,000 mortgage at 7 percent, your payment is roughly around $670 for a 30 year loan. It will take you 360 months to pay off your mortgage. If you pay an extra $50 every month, you will pay off your home in 25 years. If you pay bi-weekly, you will make one extra mortgage payment each year, which will allow you to pay off your mortgage 6 years earlier. To find out how your individual numbers play out and how adding more money affects the length of your loan, use a mortgage calculator. Paying off your loan early also saves you thousands in interest charges.
Auto – Auto loans work similarly. A $20,000, 5-year auto loan with a 6 percent interest rate will cost you $414 a month. If you pay $503 a month, you will be able to pay off your car a year earlier. Down payments, trade allowances and other allowances also affect your repayment date. It is always best to supply a down payment on large purchases.
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Credit Card – Credit cards are tricky because most people keep making purchases using their card all the while they are trying to pay it off. If you want to pay off your credit card, you need to stop using it. Let’s say you have a $2,000 maxed credit card with an APR of 19 percent. Your minimum payment would be a little over $51. If you only paid the minimum balance, it would take you 186 months or 15 ½ years to pay off your credit card. If you paid $100 each month, you could have your card paid off in a little over 2 years and save more than $2,000 in interest.
As you can imagine, interest posts a major obstacle when it comes to becoming debt free. If you can lower your interest rates by as little as 1 percent, you would be amazed at how much money you save and how quickly you can become debt free. If you’re interested in learning more, take advantage of online loan calculators. They can help you see the real picture and create a plan for becoming debt free quicker.
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About Dan Cavalli He learned financial fitness firsthand. In 1995, he started his first national business with nothing, but grew it to more than 35,000 customers and $140 million in revenue in less than 18 months. “The Financial Review," Australia's leading business newspaper named Cavalli as one of the country's “Internet’s Untold Millionaires." More recently, Cavalli's mission has shifted to helping others achieve similar success. He is the author of the internationally sold financial book, "Blueprint for Making Millions."