Last week, we left our debtor having paid the minimum payment of $25 on the $1,500 owed for car repairs.
After adding the interest of $22.50 for the first month’s payment. This person has only paid $2.50 of the principal.
How long will it take to pay off this repair at this rate? Over 12 years.
By the time the $1,500 in principal is paid, this person will have paid $2,366 in interest!
This is pretty bad, but it can get much worse. What happens when interest owed is compounded?
Come back next Saturday to see why Einstein said, “Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”