Gaining an understanding of debt is a very important step in securing your financial future. Saving requires time and discipline and sometimes it is tempting to use debt to get what you want now and pay for it later. It pays to be extremely cautious of such a strategy and this can have a serious impact on you later in life.
Let’s say for example, you have managed to incur a credit card debt of $10,000, with an interest rate of 18.5% and a minimum monthly repayment of 2%.
By making the minimum repayment of $200 per month, it would take you 62 years and 8 months to pay off your debt. During this period you will have paid the bank $32,457 in interest! Even if you double your repayment to $400 per month, it would take you 2 years and 9 months to pay off your loan and you will have paid the bank $2,729 in interest.
If you asked anyone whether they would like to pay a bank almost $50 a week for the next 63 years, or almost $100 a week for the next 3 years, the chances are that they would say no. But thousands of people are putting themselves in this situation every year.
Why not pay this money to yourself?
Avoiding unnecessary debt early in life will be a huge benefit later on. But, it is also important to understand that not all debt is bad. Purchasing assets that are likely to go up in value (such as your first home) or generating additional income using loans can often be a sound financial decision.
In addition to being able to provide you with debt management advice, GC Accountants as authorised representatives of “Count Financial Limited” have access to a superior panel of lenders who can offer you the most competitive lending products. You can also talk to us about some of the investment lending strategies available to help you grow your wealth faster.