How Much Money Are You Throwing Away Each Month Due To High Debt Costs?
Most people consider the cost of their debt as the amount of money they pay each month. What most people don’t consider are the hidden costs of their debt. Costs such as interest paid, increased stress levels and a lessened ability to save for the future. Taking all of these costs into account will show you what the true cost of your debt is.
Never Go By Just The Monthly Payment Alone
Your creditors make a lot of money by convincing you that a low monthly payment is your best deal. What you should really be looking at is the amount of interest you are paying. This is one of the reasons people suggest you negotiate the cost of your purchase before discussing the monthly payment.
Let’s say you bought a car for $20,000 with an interest rate of 5 percent. You will end up with a payment of $416 the first year you are paying for the car. The average length of a car loan is 60 months. However, the car salesman is going to want you to pay for 72 months instead.
Why is this? It is because the dealer will make more money over the term of the loan. Your payment is going to be $360 your first year on a 72 month loan, but you will have to make extra interest payments for another 12 months. You end up paying more for the car even though you are paying less per month.
This concept is true with any other loan you take out. Carrying a balance will always cost more because of the interest tacked on. Your problems could be even worse with a revolving loan such as a credit card. This is because you may keep adding new debt that keeps your balance alive for a longer period of time. And the costs of credit card debt at 19.99% and 29.99% APR are very high. You will be sending so much money to your credit card banks you won’t have much money left over to do the things you really want to do.
How Much Is Your Health Worth?
Failing to keep your debt in check can have serious consequences for your health. Stress can cause weight gain, ulcers and other health problems. Trips to the dentist could become more expensive as you will start to grind your teeth more due to stress.
Increased medical costs are just another way your debt costs you more than just your monthly payment. A trip to the hospital could cost you $500 just to be admitted to the ER. Your health insurance may not even cover costs until you hit a certain threshold – your deductible.
This means you could be paying thousands of dollars extra to cover your own medical care. Failure to pay your hospital bills could lead to even more credit calls regarding this latest debt. It can become a tragic cycle that you may not be able to get out of. Medical bankruptcy is one of the bankruptcy cases right along with credit card and mortgage bankruptcy.
Your Might Have To Mortgage Your Future Plans
There are several ways to find money to pay off your debt. Using your 401K is certainly one way you could accomplish this. However, this could delay your retirement by several years due to taxes and penalties you pay for doing so.
You will have to pay income tax on any amount withdrawn from your 401K. A 10 percent penalty has to be paid for anyone who withdraws before age 59 1/2. The biggest blow is the fact you have just depleted your retirement fund. It will take time to bring that account back to where it was before you raided it.
Even those who don’t plan on retiring soon will have to alter their future plans. Covering the cost of a marriage, home and a family is going to be impossible if you are dealing with a massive debt. It is hard to even put a cost on how much you are losing out on.
The true cost of debt is often much more than we believe it.
Paying interest on outstanding debt is one way to objectively quantify how much extra you are paying. However, you may not be able to determine the cost of losing time with your family later in life because you still have to work. That is why it is important to think of all possible consequences of being in to much debt. Calling us today can connect you to a qualified debt professional right now. Filling out the form will get your instant access to a free debt relief quote. You can fix the money leak, keep more cash in your bank account each month with our recommended debt consolidation companies that will explain your best debt relief plans.