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YOU ARE HERE > Home > Features > 7 Must Follow Steps to Getting Debt Free > Step 1 > Step 2 > Step 3 > Step 4 > Step 5

Features 7 Must Follow Steps to Getting Debt Free Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 A Bad Case of Affluenza Credit File Ode to a Debtor Payment Protection Insurance: Peace of Mind - Until You Make a Claim

7 Must Follow Steps to Getting Debt Free Step 5 - Minimum Payments Equal Maximum Expense Over the last few years the minimum payments on the likes of credit and store cards have dropped from the standard of 5% to the 2% mark. There is a simple reason for this ... lenders can extract even more interest from you. Why? Because so many people only ever make the minimum payments. Just do the sums. If the interest rate you’re charged is 1.5% per month and you make the minimum payment of 2%, how much have you actually paid off the debt? 0.5%, that’s how much. Just one measly half of one per cent. With an industry standard minimum payment of just £5, it could take you going on for 42 years to pay off your credit card. And that’s assuming you didn’t use the card again to actually purchase anything. Throw in those payment holidays, offered by the more devious card issuers, into the equation and you could really end up paying. Take an actual credit card on offer at the moment, which charges an interest rate of 1.4566% per month. Borrow £2,000, pay the minimum 2% per month, and take a payment holiday every six months ... how long do you think to clear? Length of Time Making Repayments Total Paid to Credit Card Company Total Interest Paid Total Paid Off Debt to Date 1 year £393.16 £342.68 £50.48 5 years £1,869.05 £1,629.06 £240.00 10 years £3,513.81 £3,062.62 £451.19 25 years £7,355.79 £6,411.26 £944.53 50 years £11,237.70 £9,794.72 £1,442.99 92 years 11 months £14,211.14 £12,211.14 £2,000.00 That's right ... Nearly 93 Years. And you’d have paid £12,211.14 in interest into the bargain. It's staggering, but spend £2,000 on your credit card on your 18th birthday and you'd be nearly 111 years old by the time you'd paid it off. The lesson - if you can afford to pay more than the minimum payment ... PAY IT. Pay as much as you can, as soon as you can. You don’t get out of debt by only ever making the minimum payments.   <<< Step 4 Step 6 >>>

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