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Debt Settlement - How Much Money Are You Wasting?

By J Chase

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Published: 23Jan2010
Word count: 478
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When news outlets report interest rates, it can be difficult to understand exactly why a high interest rate is such a tragedy. What you need to understand is that when your money goes towards interest, you are not benefiting from the process; you are simply padding the pockets of the lender. If you are in a situation where your debt problems need to be dealt with immediately, you probably need to know which credit cards are creating the most debts. This largely has to do with how high the interest rate is on the card.

For example, if you have a credit card balance of 5,000 dollars with an interest rate of 15 percent, you will pay 421 dollars of interest in order to you pay that card off over the course of a year. However, to pay that balance off over the course of 12 months would require a monthly payment of 451 dollars. If you were to pay a minimum payment of 106 dollars, it will take you six years to pay off the credit card debt and you will be paying over 2,500 dollars in interest alone! That means the overall debt was increased by 52 percent.

Various websites have debt payment calculators that you can use to figure out what your interest is over the course of a year, two years, etc. If you have heavy credit card debt, this might be just what you need. For example, if that 5,000 dollar credit card debt had a 20 percent interest rate instead of 15 percent, it could wind up costing you twice as much in interest. If you paid that 106 dollar minimum payment, you will wind up paying just under 5,000 dollars in interest over 94 months! Five points in interest can cost you almost 2,500 dollars. Even a 1 percent different in the interest rate (from 20 percent to 21 percent) will increase your interest total by almost 800 dollars.

So, it is obvious that your interest is important, and that when you are paying back your credit card debts, you should take a serious look at which credit cards have the highest interest rate. Also, if you hire a debt settlement company to create a debt settlement program for you, it is important to discuss with your representative the interest rates on your cards. Any debt relief plan should involve a strategy that targets high interest rate unsecured debts, such as credit card debt, department store cards, unsecured lines of credit, etc. Student loans usually do not have high interest rates, so handling those debts towards the end of your debt settlement program might be the best strategy to go with.

It is also important to take into consideration the late fees, yearly membership fees and other fees associated with the credit cards in question. However, the biggest factor in creating an effective debt settlement plan is ? how high are the interest rates with each card you owe money on?

J Chase is a debt settlement professional. He is affiliated with a national debt settlement company which has helped 1000's of people eliminate their debt effectively. He has extensive knowledge of the internal and national debt settlement programs. For more information visit http://www.debtsettlerz.com

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