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4 cons of paying your debt slowly
Financing is the new way of life. Though it can appear harmless, it can be detrimental to your finances over time.
You don’t have to settle for minimum payments when you can afford things; instead, you can eliminate debt immediately.
But most people don’t want to or can’t do this because their cash flow is limited, they consistently overspend, and they don’t have any savings to cover purchases with cash outright.
Why I Paid Off My Car In 3 Years Instead of 6
When I purchased my first car, I was thankful and happy but quickly realized I overpaid.
To tackle this regret, I refused to pay any more than necessary. Hence, I paid off my car in half the time to avoid paying more interest fees.
What did this look like?
Sometimes I made double or bulk payments when extra resources came in. But I always paid more than my minimum payment – even if it was only a little more.
And I started paying more than the minimum payment relatively soon after buying the car.
3 Cons Of Minimum Payments
1. You’ll Stay In Debt Longer
Minimum payments are meant to do one thing: Keep you trapped and in debt.
The longer you stay in debt, the more money you make for the credit card company.
The more you stick to your minimum payment schedule, the more you spend on interest fees.
Learn how to take advantage of credit card companies.
2. You’ll Overpay On Interest Fees
Interest fees accumulate. If your balance isn’t significantly high, it might not appear pricey, but over several years, it adds up.
The worst part about paying the minimum payments on your purchases is paying more for the item you initially purchased.
A $2,000 refrigerator might end up costing you $3,000.
A $10,000 vacation could end up costing you $15,000.
Most of the things we buy are depreciating assets, which means if you opt into paying the minimum payment, you will be paying a premium on a depreciating asset.
Example of minimum payment for a $10,000 balance (Source: National Debt Relief)3. Your Credit Will Be Impacted
It helps when you make your debt payments on time, but paying minimum payments also keeps debt on your credit profile for more extended periods.
If your balance is high, you will have a high balance for an extended period, negatively impacting your credit score for the long haul.
4. A House Fire
If you’re not tracking your spending and monitoring your debt load because you can “afford” minimum payments, one day, you could end up with several minimum payments that overtake your budget.
Always pay more than the minimum payment, and always prioritize paying things off early instead of when they’re originally due.
How many minimum payments do you have to pay each month?
How much do all of these minimum payments cost you?
Are your minimum payments easy to manage?
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.