For opening credits, banks attract customers in every possible way: low interest, long-term repayment period, no money down, mortgage payment holiday, small monthly payments and so on. However, getting your desired thing by using bank credit, you would be no longer happy: now you need to pay the credit back for many years. Especially, keep in mind, that in annuity credit ( the credit with equal payments ) firstly you pay the bank percents and credit itself stays for the end. You can say it’s not fair! But that’s how the things work.
Annual credit payments take the large part of income, which theoretically could go into savings and investments. So, how to pay your credit faster? There is easy, but effective way how to get rid of credits in short time.
The recipe is easy, it was mentioned again and again in literature: simply increase your annual payments, for example for 15%. Bold, but it works – check this out. Thus, there is one small detail. If you increase payments for 15% on multiple credits ( 5% on mortgage, 5% on car leasing and 5% on consumer credit) there will be no effect.
Let’s see the case study. Imagine you have several credits and loans with total amount monthly payment of $ 900 (see below):
|Mortgage||25 years||$ 500|
|Car leasing||8 years||$ 200|
| Consumer’s loan
|2 years||$ 200|
Remembering, the total monthly payments are $ 900, 15% from payments – is $135. Now, you just need to plus this number to consumer’s loan monthly payment – $200 + $135 = $335. We chose the consumer’s loan because of it’s short time. Other credit payments stay the same. By doing this, we easily decrease consumer’s loans time in two.
So, you’ve left with 2 credits: mortgage and car leasing. Do not reduce the payment amount. Let’s take a look on long term car leasing. The monthly payment $200, 15% or $135 in our case and $200 (the sum you used to pay for consumer’s loan). Altogether, $200+$135+$200=$535 goes as payment of car leasing. You decrease the leasing term almost in two times.
Now, when you paid off your 2 credits, only mortgage has left. You put all $900 (reserved for monthly payments) and 15% ($135). That will add much to the payment and you’ll be out of ‘debt prison’ in a few years sooner.
General advice: try to avoid credits, take less and use them for things you really need!