Day 16 - Loans

so check this out...

calculating my loan payments over the last 9 months i paid a total of $1797.61 to my loans. this was at a rate of 199/month for 9 months. of that total amount $532.50 went towards the principal, and $1265.11 went towards the interest.

BEFORE:

$532.50 (principal) + $1265.11 (interest) = $1797.61 (total paid in 9 months at $199/mo)

in short: only 30% to principal, and 70% went to interest.

when i got the lump sum from the volunteer program i did and they paid $1174.60 to my loans, $1106.21 went to principal, and only $68.39 to interest. the ratio flipped: 94% to principal and only 6% to interest.

NOW:

$1106.21 (principal) + $68.39 (interest) = $1174.60 (total paid from volunteer program)

in short: 94% WENT TO PRINCIPAL, and only 6% went to interest!

In a matter of ONE MONTH PAYMENT I made a bigger impact on my overall loan balance than I did over NINE MONTHS of paying the minimum balance. that's crazy!

case in point: the less time you give to the loan to accrue interest, the more of your dollar will go towards decreasing your actual loan amount, instead of being wasted on interest.

the faster (in time) and the higher (in payment amounts) you pay your loans, the quicker you will pay off/down your loans. this part is obvious, right?

BUT...the longer we take to pay down, the less of our dollar that goes towards the real balance.

SO all this to say, I know most people aren't in the position to pay $1,000 bucks a month towards their loans (myself included) HOWEVER...even paying an extra $50 can add up over a year's time, or even $20 bucks. More is definitely better, but I encourage you to pay as much as you can muster this year and make loan payments a priority so you can BE DEBT-FREE. (who doesn't want to travel the world and live life without the burden of monthly payments hanging over your head?)

Don't settle for the "minimum payment," like I did. It's a joke and a scam.

Debt reduction is one of my big goals over the next 24 months and with this new information I've been really motivated to stick to the plan.

Hope you find this information helpful! Comment below if you have any advice or suggestions for others!

Thanks!