Debt chart

December 9, 2011 by · Leave a Comment
Filed under: Bankruptcy, Debt Management 

You may have heard tell that the magic of investing lies in compound interest. Understanding how compounding interest works is important when you begin looking for debt relief options, because it will help you see that it’s misleading, and offers a stupid return on their initial loan. If you are rebuilding your credit, here’s good reason to avoid these “products.”

Compound interest is when they charge interest on interest, when the interest charged on the principal is then added to the principal. In a sense, it’s charging (or earning) interest on interest). Banks and credit card companies are full of this kind of magic. Here is a chart detailing the number of years required to pay off a credit card balance. It assumes 19% interest and a minimum monthly of 2.1% of the outstanding balance. Usually credit cards require a minimum monthly payment between 2.0% and 2.5% of the outstanding balance. Source: CNN Money

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