| Loans are a part of modern life that most people can't | | | | payment and may not even think about the loan for |
| avoid. Whether it's paying for a car, buying a home or | | | | years as it quietly eats away at your income and |
| financing an education, we often have to borrow | | | | potential capital. |
| money from Peter to pay Paul. Often loans come | | | | Many people intuitively think that it makes more sense |
| disguised as great opportunities in the form of low | | | | to pay back higher interest rate loans first. This tactic is |
| interest rates. Obviously low interest rates are | | | | fine if you actually intend to pay off all of your loans |
| desirable to high rates, but over time even a very low | | | | and establish a firm plan to do so. The problem is that |
| interest rate can turn into a substantial cost. | | | | people often find that they never fully pay off high |
| Student loans are one of the most common sources | | | | interest loans such as credit cards. Meanwhile, the |
| of low interest debt. These loans are often subsidized | | | | interest loan quietly nibbles away. If you think this might |
| by the government and the payments deferred while | | | | be the case with you, go ahead and pay off the |
| one finishes school, which allows the debt to silently | | | | interest loan first to get it out of the way. Once this |
| add up without one noticing the mounting costs. Once | | | | loan is gone, the money you save can go towards |
| one finishes school, lenders often set a very low | | | | paying off your other loans. If nothing else, it will feel |
| payment requirement that keeps the loan active form | | | | good to have at least one loan fully off the books. |
| many years, further adding to the overall cost of the | | | | This interest student loans are designed around the |
| loan. That simple student loan of $20,000 at 3% | | | | assumption that one's earning potential will go up after |
| interest can nearly double in cost over the next twenty | | | | graduation. This is usually the case. The problem |
| years. | | | | comes from people spending their new income on life |
| Often, we are not overly concerned about the loans | | | | rather than repaying the loan in a timely manner. Used |
| that come with interest and don't even view them as | | | | as they were designed, these loans greatly help |
| a debt in many cases. We become so accustomed to | | | | struggling students pay their bills while they earn their |
| paying the small fee each month that it becomes | | | | degrees. But if they are abused, even the low interest |
| automatic and doesn't cause us worry. Many people | | | | rate can quickly lead to financial problems and cost |
| set up automatic payments to fund the minimum | | | | you much more than necessary. |