I saw a post saying that two people left school 23 years ago with a combined debt of 70k. They paid 500 USD monthly for 23 years and still owe 60k.
I’m thoroughly confused. obligatory not from America.
In: Mathematics
Like with any loan, if you pay the bare minimum every month then you will be maximizing the amount you pay in interest. In your example, the two people must have been paying a minimum that only covered interest and did not cover principle.
Very long term loans can end up getting you to pay incredibly large amounts of money in interest if you don’t get ahead of the term and pay off early. A mortgage is the best way to see this. Lets say you get a mortgage for $400,000 for a 30 year term and only pay the required amount, never paying any extra. When the mortgage is paid off in 2054, you will have paid a total of $1,260,000 for a loan of only $400,000. The amount of interest alone will be more than twice the principle. Paying an extra $500-$1,000 a month over the term saves you hundreds of thousands of dollars.
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