For example, someone is making payments on loan that is worth 5,000 and the annual percentage rate (APR) is 7.5 percent. It may only take 5 years to pay this off and the person is paying $100 a month. At the end of the 5 years, though, they have paid $1,011.38 in interest alone. The interest at the end of the five years is up to twenty-percent. If the consumer would add just $50 a month to what they’re paying, then they will only have only paid $599.12 in interest at the end of that five years and the interest rate would be only 11 percent. By increasing their monthly payments just that little bit, they cut their interest payments and rate literally in half. This shows that if someone has personal debt, they have to be very careful how they pay it off. If the same person paid it off in seven years their interest rate would be 28% and they would have paid $1,442.08 in interest. The longer a person takes to pay off these debts the more money companies get from them and the more money they waste.
