Saturday, March 7, 2009

Interest Can Be Expensive

I was online taking a gander at two loans we have. Looking at how much interest I have paid compared to the principal over the life of the loans. YIKES!

The hubs and I took out a loan in November 2006 to buy our Subaru. In just over two years we have paid the principal down by $4111.21 and have paid interest of $1503.79.

In September 2007 the hubs and I took out a personal loan to pay off credit card debt. The interest rate was so much better than what we had on our credit cards. In just over a year we have paid the principal down by $3444.97, paid interest of $2280.03 and debt protection of $893.67.

TOTAL - $12,233.67

For this amount of money we could have bought the Subaru outright or taken a stupendous vacation or a couple of great vacations or just socked it away in our savings.

Of course when you sign up for a loan you know that your entire payment is not going to go to principal. When you look at the hard numbers you see exactly how much that borrowed money is really costing you. It's kind of scary really.

One thing I can say by looking at the numbers is I am even more antsy than ever to get the debt paid off. Between finance charges on our credit cards and interest payment on our loans it just kills me. Presently we are paying as much to our debt as we can while still trying to get my Subie back on the road. A few small parts and the hubs and his friends are ready to put the new (to me) engine in. Then it will be back on the road.

We actually have a plan in place to refinance and consolidate our debt to where we will have much less in minimum payments every month. Part of this plan we will not execute for a couple of months as we want to get credit card and loan balances down as much as possible first.

Do you know how much interest you are paying to your debts every month?


Jenn said...

I try not to think about how much we pay in interest. The worst one is my student loan that I refinanced a few years ago. I understand the theory that if you have to charge it, you can't afford it, but if you need car repairs and don't know anyone who's handy enough to repair it, it has to be charged, you know?

I'm glad we bought our house when we did. There's no way that we could have afforded to put away money for the down payments that are required now. We were paying almost as much to rent as we pay to own our house!

paisley penguin said...

Yeah, some of our credit card debt was car repairs. Some is things we needed for the condo. We are just looking to get in to that place where we have the debt under control and paying down and money in savings for these kind of emergencies.