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Around 11½ million Brits have a mortgage, and a large proportion see their home loan as their biggest burden. Indeed, signing up to a 25-year mortgage means promising to make three hundred monthly repayments before you finally get to own your home. Trust me, it's a long slog! However, although a mortgage may sometimes seem like the burden of a lifetime, there are worse debts lurking out there. For example, if you choose the wrong credit card, you could find yourself with a debt that lasts forty years or more! Let me show you what I mean: Let's say that you have a credit card which charges an interest rate of, say, 1.5% a month, which is a fairly common rate. That doesn't sound too bad, does it? Aha, but thanks to interest on interest (and interest on interest on interest, and so on) this compounds up to a hefty 19.6% APR (which is 1.015^12, where "^" means "to the power of"). So, an innocent-sounding 1½% a month adds up to almost 20% a year. Ouch! Now let's go further by assuming that your card issuer requires you to make a minimum monthly repayment of, say, 2% of your monthly balance (minimum £5), and that you decide to pay only this minimum. So, how long do you think it will take to repay a debt of, say, £1,500? Three years? Five? Maybe ten, at the most? Incredibly, the answer is an astonishing 37 years and seven months. That's right: a single debt of a mere £1,500 can take almost 38 years to repay if you only hand over a minimum monthly repayment of 2%. What's more, the total amount repaid will be a whopping £5,466, being your original debt of £1,500, plus a tidy £3,966 in interest. Blimey! Naturally, no-one wants a debt that would start at age 21 and finish close to your sixtieth birthday, so here are two easy ways to get rid of it: First, never pay only the minimum monthly repayment! Instead, set up a standing order for a level monthly repayment, say, 3% of your balance, which would be £45 in the above example. Paying off the above debt at a flat £45 would kill it in a month short of four years. This is 33 years and eight months faster than in the first example! Furthermore, your interest bill will be £595 and the total repaid £2,095, saving you a handsome £3,371 in interest. Second, if you want to be really cunning, you could surf your debt across a series of 0% credit cards, which provide you with introductory interest-free periods lasting up to a year. Let's assume that you have a reasonable credit rating; one which allows you to switch 0% credit card every, say, six to nine months. Using this technique, you can pay off a £1,500 debt at £45 a month in just 34 months -- and without paying a penny in interest along the way! You can learn the tricks of the 0% trade in Your Ultimate Guide To Credit Cards. Finally, if your debts are proving a heavy burden to shoulder, these links will help: More: Check out these cracking credit cards and perfect personal loans!
