Tuesday, July 16, 2024
Household Math™: Biweekly Payments
by Scott Bilker

 Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about Scott Bilker and DebtSmart can be found in the online media kit.

Test your knowledge by trying to solve this DebtSmart, Household Math™ problem! After you complete the problem, you’ll get the solution and explanation.

 1 You borrow \$25,000 at 8% for 5 years to remodel your kitchen and bathroom. Your loan requires 60 monthly payments to completely pay off the loan. After you get the loan, one of your friends tells you that you can save money by making payments more frequently. They tell you that this happens because you pay off some of the principal earlier and are not charged interest on that principal afterwards. Sounds good. Here’s the question. If you convert that 5-year (60-month) loan into a loan that requires 130 biweekly payments (still 5 years) how much money will you save in overall bank payments?
 \$44.00 \$252.00 \$1,036.00 \$2,754.00 \$5,867.00 I don't know!

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