Do you know the numbers when it comes to what your debt costs you - the interest you pay.
Do you know how interest compounds over time and makes your debt grow?
After watching this two-minute video, you will understand the numbers and you will know how to stop the debt spiral.
Watch here or watch on YouTube.
#knowyournumbers
(full transcript)
How much does your debt cost each month?
Interest is paid on every loan or credit purchase and is based on the repo rate - the rate at which the South African Reserve Bank lends money to banks.
Remember, while the interest rate you pay on loans and credit purchases is linked to the repo rate, the rate you pay also usually depends on how good you are as a creditor.
Interest can be a useful tool in helping your wealth to grow. It compounds for you if you save up and just wait. However, interest can compound against you through your loans and credit.
For example, if your repayments are less than the interest you’re paying, the interest added each month will grow your debt, and future interest will be calculated on the higher balance.
Check out the cost of credit on the Smart About Money website.
Compounding interest makes your debts grow and your purchases cost much more.
That is why you need a plan to pay off a little more than what your monthly repayments are.
Even R100 or R200 extra every month could see a huge difference in a few months.
Imagine you owe R10 000 on a personal loan. You are repaying R500 a month.
You are set to keep paying for two years and two months, and you will pay more than R3400 in interest.
But just R200 a month more each month will reduce your repayment period by nine months and the interest you will pay by more than R1200.
Visit the Smart About Money website and use our debt repayment calculator to see how your extra monthly payments can save you time and money.
Watch the next video to see how to approach debt repayments when you have more than one debt.
