We should check as well the two scenarios available: Let’s take the example of someone who has left to pay a balance of $100,000 at an interest rate of 4% and with a current monthly payment of $1,300. Regarding the option to set up a new term to pay off the loan must be said that will generate as well some savings in interest while the term to pay entirely the debt is the one desired and the monthly payment will increase in comparison to the current level.In this case the person will pay off the loan in 4 years and 9 months, while the total interest paid would be $12,485.Īs it can easily be observed in this case both the total interest paid and the time in which the loan is paid entirely diminishes. Second scenario assumes that the person in question decides to add month by month the amount of $500 to the monthly payment of $1,500 which means she will pay each month a total of $2,000. In this case the person will be debt free after 6 years and 7 months, while the total interest paid would be $17,570. First scenario assumes that the person in question will continue paying the monthly payment of $1,500. Let’s take the following example of someone who has left to pay a balance of $100,000 at an interest rate of 5% and with a current monthly payment of $1,500. Regarding the option to add an extra amount to your monthly payment must be said that it leads to paying early the debt and that it generates some savings in interest as well.There are 2 approaches when trying to reduce debts: one is to add extra regular payment to the current amount paid month by month and the other one is to set up a new term by which to be debt free.
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