Thursday, December 16, 2010

What If You Weren't Allowed to Pay Down Your Debts?

I was cruising the frugal and money blog circuit when I came across a post by Kelly over at Almost Frugal about saving money when theres nothing left in the budget to save.

What struck me about the post wasn't the solution, but her comment that in France it's incredibly hard to make extra debt payments. I froze when I read that, not because I think it will become my reality, but at the thought of it. I've always paid off debts very aggressively; what if my credit card was like a mortgage? What if I was restricted in my ability to make extra payments? I could have been chipping away at my student debt 20 years, rather than the year and 2 months I actually spent paying it off. What if my credit card forced me to make minimum payments only? I remember opening my credit card statement a little while back and reading their calculation of how long it would take to pay off the balance making only minimum payments:

Almost 30 YEARS.

That's a mortgage in itself. By the time it was paid off I'd have paid for the balance several times in interest alone. That's a scary concept, and unfortunately it's one that people live with all too frequently. I've been to France a couple times, and I love the French lifestyle, but I would not be okay with paying off my debt like the French. At. All.

So why would someone restrict your ability to pay them back? Wouldn't they want their money back as soon as possible? The answer is quite simple really, I've already alluded to it above: they make more money by lending it to you than they do by keeping it in their own pocket. How much interest do you make on your savings account? 1%? How much are you paying on your debt? 20%? You and I quite frankly, are high interest savings accounts to the lenders of the world. How does it feel? I know if I was a lender I'd want to lock that rate in and get as much for my money as I could.

I'm unfortunately painfully aware of how much my debt is costing me in interest every month, and I don't want this albatross hanging around my neck for the rest of my life. I'm going to pay this sucker off as fast as I can. Kelly, I wish you the best of luck, and I hope you can convince them to let you pay a little extra when you can.

And the next time I go to France, I'm paying cash.

The Wealthy Barber: The Common Sense Guide to Successful Financial Planning
Debt Free For Life: The Finish Rich Plan for Financial Freedom
Debt-Free Forever: Take Control of Your Money and Your Life

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