Know the Fine Print.

Do you know how much you owe on your loan?  How many dollars per month is that interest rate?  What happens if you are late, are there fees?  How much does the interest rate go up?

These are important questions for any loan (student, house, car, credit card).  It is sometimes easy to use the worry about it later mentality.  This is especially true with student loans.  We are so focused on getting into and getting through school, some of us just sign on the line at the financial aid office.  The same thing can happen when buying a house or car.  The sales people are in the business of making it easy for us.  Lending is a huge profit earning industry.  It is a business.  We need to be smart consumers so when that first payment comes in the mail, reality doesn't smack us in the face.

If you are wondering about your loan interest, here is a loan calculator that will explain what 8% means in dollars http://bit.ly/eAmQl1.  After you type in the loan amount, interest rate, and terms, click on the amortization table.  If you follow the total interest column all they way down to the bottom, it will show you the total amount of money you will pay in interest.  Many people are unaware of how much they are actually paying.  Ignorance might make you feel better in the moment, but I think knowing this information will inspire you to skimp on the beer and throw cash on the loan.

Examples:
If you have a $50,000 student loan at 8% and are paying $477 for 15 years you will end up paying $36,000 in interest making the total cost of college $86,000.

If you buy a $150,000 home at 5% and only pay the $800 due every month, at the end of the 30 year mortgage you will have paid almost double for that house $290,000! 

There is a better way.  

·         Don’t Over Commit Yourself

If you are starting out, do not borrow for the biggest house and the nicest car you can afford.  All good things will come in due time.  If you are maxed out now what will happen when you hit a bump in the road?

• Over Pay

If you are currently in a loan, plan to overpay.  Any amount you can throw on top of the minimum will save you in the end.  A $50 per month over payment on the mortgage example will save you almost $20,000 in interest over the life of the loan.  The sooner you can make it disappear, the sooner you can do other things with your money. 

·         Sign up for Financial Peace University

If you are feeling overwhelmed about your financial situation, click here

http://bit.ly/dSDkpT to find a 14-week Dave Ramsey class in your neighborhood.  Learn about how to become debt free while building a support network.  FPU has helped thousands of households, it can help you!