The Real Cost of Debt
This Thanksgiving I am grateful that I took control of my finances and became debt free. To celebrate the accomplishment, I calculated the real cost (total cost) of becoming debt free. The real cost of a loan includes the original principal balance plus the interest and other fees over the lifetime of the loan.
In August 2014, when I decided to pay off my loans early instead of just making the minimum payments, the principal was about $80,000. If I did not pay off my loans early, how much would I pay over the lifetime of the loans? Drrrrrrrrrrrrrrrrrum-roll, please ‒ ba-dum-bum-CHING. I would have paid over $110,000. Ouch!
Again, I am thankful that I decided to become debt free. Instead of paying money to “the Bank,” I have the freedom to invest in my family, my friends, and myself. Now, I can save, give, travel, etc. The options are unlimited. However, I paid a price to be free. How much did I actually pay to clear $80,000 in debt? Another drum roll please ‒ da-dum-da-dum-da-dum-da-dum. Over the lifetime of the loans, I paid over $94,000 to become debt free. Wow! I saved at least $16,000 by paying it off early.
I challenge readers who decided to pay off their debt early to calculate how much they would have paid over the lifetime of the loans. Readers who are already debt free, calculate the price you paid to be free. Comment below and tell me how much.
Hope you had a wonderful Thanksgiving!
By Simone, Creator of Slim Fit Wallet