Compound Interest Loans: Best Friend or Worst Enemy?
It is a generally accepted truth that when we get a loan, we have to pay off the amount of the loan and the interest that is extra money. The interest takes the form of an annual percentage rate. It is typically higher than the actual interest. Making parallels between the annual percentage rate of loans will simplify comparing of several similar loans. The loan that has the lowest annual percentage rate is the best deal.
But pay your attention to the fact that the annual percentage rate is not the loan true cost. The cost of a loan is very much dependent on the timescale of paying the loan back. The longer the period the more money you’ll have to pay. Very often lenders offer loans with a low annual percentage rate but a huge paying off period occurs, so they make traps for borrowers. Thus, attracted to seemingly sound annual percentage rate, you’ll have to pay lots of money, in fact.
Today there are a lot of advertisements for mortgage companies who offer a 50 year mortgage. However, it is a real madness to get such a loan because you’d be about 70 years old before you paid it off. It is hard to imagine the interest amount for such a loan. Such offers for long-term mortgages may seem quite good and reasonable on paper, but they are not in reality. Companies persuade us to borrow more and more because they want to secure their income.
Unfortunately, there are always people who get seduced by these offers. It seems to be a brilliant opportunity to pay just $200 for a loan that is estimated in hundreds of thousands of dollars. The sum is really tiny. But think that you’d pay it off during 50 years and may not pay it off completely. It means to be a debtor for your entire life. Once you took a loan you’ll find yourself to be in the company of interest all the time, day and night. You won’t be able to turn away from it or shun it. It’ll be demanding and ordering and if you fail to nurture his needs, it will destroy your life.
Mortgage companies with their compound interest loans turn us into slaves. We should not acknowledge such bondage to be acceptable. The changes are needed. Don’t let mortgage companies crush you. Don’t agree to be in debt for life.
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