College LoansPaying off a $20,000 loan with an interest rate of 5% and monthly payments of $100 would take around 35 years. This loan would actually end up costing around $22,393.76. That's almost $2,500 just in interest.
This same loan and interest rate with a $50 monthly plan actually wouldn't work at all. $50 a month is just enough to pay off a little interest and none of the actual loan. The amount of money will just increase exponentially for eternity. Paying off this loan with a $150 monthly payment would be more reasonable than $100 and $50, it would only take around 15 and half years. Federal subsidized and unsubsidized loans for an undergraduate student both have interest rates of 4.45%. It's very surprising to me just how long it takes to pay off $20,000. It's also very interesting how much of an impact 50 more dollars a month would make- in this situation, 20 years.
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November 2017
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