Thursday, February 6, 2014

How Much Did I Save By Paying Off My Debt Early?

$10,000 - That's how much!

Debt freedom feels as freeing as this photo!
How did this happen? By throwing as much money as possible towards the debt (utilizing the debt snowball method).

I calculated the $10,000 I saved by determining what I would have paid if I had just made the minimum payments starting in May 2012, when I began this pay-off journey. I took the starting loan balance, the interest rate, and the original minimum payment, then plugged those numbers into this handy online tool. Here are the results:

Undergraduate Loan: 
$18,010.57 @3.5% interest rate.
Minimum payment = $121.30
Total to pay off with interest added = $23,551.57 ($5,541 interest)
Projected date of payoff: October 2029
When I paid it off: December 2013
What I actually paid: $19,133.34
Total interest paid: 1,122.77
Money saved: $4,418.23

Graduate Loan #1
$9,950 @ 6.5% interest rate.
Minimum payment = $112.98
Total to pay off with interest added = $13,500 ($3,550 interest)
Projected date of payoff: July 2023
When I paid it off: September 2012

Graduate Loan #2
$13,136.28 @6.5% interest rate.
Minimum payment = $152.19
Total to pay off with interest added = $17,678.28 ($4,542 interest)
Projected date of payoff: April 2023
When I paid it off: March 2013

What I actually paid (both grad loans): $25,859.09
Total interest paid (both grad loans): $2,772.81
Money saved: $5,319.19

Not only did I save close to $10,000 - I saved 16 years. If this isn't proof that you should pay off your loans as quickly as possible, I don't know what is!

2 comments:

  1. I am always throwing money at my mortgage when I come across extra cash. Plus I pay more than the minimum every month through one of their payback options. Last I checked, I had knocked FIFTEEN YEARS off my mortgage in under 5 years! Astounding!!!

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    Replies
    1. Casey, that is amazing! Way to go! I think that compound interest is one of those financial issues that people really don't understand. You can save SO much money but just paying more than the minimum.

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