When you have an outstanding balance, it’s important to understand all the components that go into paying it off in a timely fashion. It’s also important to keep in mind the interest rate, the minimum monthly payments, and the time it will take to pay the balance in full.
The infographic example illustrates two methods of paying off your credit. In this example, the amount owing is $1, 800. Now imagine if you were paying off student loans or buying a brand new car. In the end, simply paying the required minimum doesn’t really work well for you. By paying more than the required minimum, the time it will take to reach a zero balance and the interest accumulated exponentially decreases.
The Financial Consumer Agency of Canada (FCAC) has a great calculator. You can input your own balance, interest rate, and desired payment and the calculator will indicate the amount of time it will take to pay off your balance.
Did you know?
The time it takes to pay off a bill using only monthly payment is found on every statement!