Paying the Price
If you have a FICO score of less than 620, it’s a safe assumption that the loans you pursue are subprime. That isn’t necessarily a bad thing, because you often can justify the higher cost of such a loan when you need something like a car to get to work. However, using a biweekly amortization schedule calculator such as we have at Half A Payment™ will show you just how costly such loans really are. This, in turn, will provide the motivation to help you pay those loans off as rapidly as you can. We’ll show you how to do this.
An article by Bank Rate explains that subprime lenders charge higher interest rates to cover the added risk of default when lending to individuals with lower credit ratings. Some of these interest rates can be triple that charged those with excellent credit ratings. Over time, that often means you pay the lender far more in interest than the original amount of the loan. For example, our credit card payoff calculator shows how many years you end up paying if you only make minimum monthly paymentsHow Interest Works
Subprime lenders like to make payments easy over a long period of time because they make much more money in interest. You pay interest every month on the total outstanding balance. Your total payments to eliminate a debt are the result of:
- How much you owe
- What you pay every month
- When you pay each month
- What your interest charges are
Many lenders set up payments so that most of the amount you pay each month goes only to the total interest charge. This means that your outstanding balance stays high and you have to pay more interest the next month and the months following. People are often surprised when they use our credit card payoff calculator and find that making only minimum payments on subprime credit cards means you can be paying for that fast food lunch over a not so fast number of years.
The way to get out of this interest trap is simple if you understand the two principles we teach our followers at Half A Payment™.The goal of our concepts is to reduce your outstanding balance each month and have more of your payment go to your balance, not just to pay high interest charges.Saving Time and Money
Our website has a lot of useful information and some handy tools, such as our credit card payoff calculator and the easy-to-use biweekly mortgage calculator with extra payments. We show everyone that visits us that they can be debt free if they use these simple tools. We also provide the motivation to do so when you see just how much money you can save in interest charges by following our concepts.
These tools are based on our two principles:
- Make half your monthly payment twice a month
- Pay a little extra with each payment you make
For example, when you use the credit card payoff calculator and the biweekly mortgage calculator with extra payments we mention above, you simply input a few things like your current payment and the interest you pay. When you see the results of making half payments and adding a little, you’ll be amazed at the thousands of dollars you can save, especially if you have subprime loans. For some mortgages, you can cut as many as three or more years off your payment schedule. These concepts work for credit card debt, auto loans, and any type of debt where you make monthly payments.