| |
| |
|
Loans Information |
|
|
|
The Wonders of Compound Interest
Albert Einstein called compound interest "the greatest invention of all time." It has even been referred to as the "Eighth Wonder of the World." The trick is to get this tremendous force working for you rather than against you. Is compound interest gobbling up a significant chunk of your earnings? If you maintain an ongoing balance with a credit card company, compound interest is costing you much more than you probably realize. Let's start with basic interest, which is a fee that you pay to a lender for the privilege of borrowing his money. This interest is attached to the original amount at an agreed upon rate. Compound interest is calculated on the balance owing plus any previous interest charges. So then you find yourself paying interest on the interest. This compounding effect continues until it virtually takes on a life of its own. Credit card lenders make a killing putting this principle to work for them. Allow me to illustrate. Let's say you're carrying a balance of $1,000 on a credit card with a 15% APR. If you pay only the minimum each month, you could conceivably gnaw away at this debt for over 25 years and end up repaying a total of over $3,400! If, on the other hand, you could commit yourself to paying $100 per month, this debt would be wiped out in less than a single year and the interest would come to a much less offensive $75. Now let's look at what would happen if you took $1,000 and put it to work for you instead of against you. Let's assume that you are able to keep your hands off this money and simply let it sit and earn 6% interest compounded annually. After 12 years, your money would have doubled without you adding one extra penny! You can quickly figure out in your head how long it will take for a sum of money to double by applying the "Rule of 72." You simply take whatever interest rate you're earning (6% in this case) and divide it into 72. The result will be the number of years required to double your money. (72/6 = 12 in our example) You can apply the rule backwards as well. Let's say you have a lump sum of $5,000 that you would like to grow into $10,000 in 8 years. You would need to find an investment that pays 9% compound interest. (72/8 = 9). If the best you can find is an 8% return on your money (hypothetically speaking,) then it would take you 9 years to double your money. Not bad for just letting it sit there! Now let's assume that you want to help the growth rate along, so you add an extra hundred dollars to this account just once a year. At the end of the 12 years, you would now have $3,800. If you could discipline yourself enough to add $200 a year, then you would find yourself with almost $5600. Seeing your money grow like this might well entice you to invest more money each month and really reap the benefits of this wealth-generating principle. And there's more good news. These examples demonstrate what happens when your investment compounds annually. Some institutions are more generous, compounding your interest quarterly, monthly or even daily. It's pretty clear which end of the compound interest principle you want to be on. The first step toward the winners' circle is to pay off your existing debts. Even if you're already having trouble making ends meet, a mere $1 addition to a minimum payment can significantly shorten the life of that loan. That's right, just one dollar. You won't miss it and it would be well worth it. Remember the compounding effect. And once you're out of debt, there's no minimum for earning compound interest. Any sum that you can set aside will do. You don't need to be Donald Trump or Bill Gates in order to benefit from compound interest. It can work wonders for us all. About The Author Rosella Aranda, international marketer, writer and business mentor, collaborates with a team of experienced professionals to help people achieve financial health and peace of mind. To learn how to reduce your debt, view: http://www.FreeFreedomSeminar.com. For further information on how you can become financially independent, please visit http://www.FinancialFreedomWorld.com or write to rosella_aranda@yahoo.com.
MORE RESOURCES:
Loans - Google News |
|
|
|
RELATED ARTICLES
About Personal Loans What are personal loans? They are unsecured loans that a borrower obtains for various purposes. This type of loan is often used to consolidate outstanding debt into one monthly payment, but it can be used for other things such as paying for a wedding, a vacation, or something similar. Bridging Loans - Fulfilling Financial Shortfall between Real Estate Transactions You are trying to buy a new property and selling the current one to raise money for the new purchase. It is usually difficult corresponding sale of one property with the buying of another. How To Apply For a Business Loan Worried about how to apply for a business loan? Although it may seem like a daunting task at first, it can be made less so by careful preparation. When applying for a business loan, you must prepare a written loan proposal. Cash Advance Payday Loans The ads are on the radio, television, the Internet, even in the mail. They refer to payday loans - which come at a very high price. Bad Credit Car Loans - Why They Are Easier To Get Than They Ever Have Been Car loans are easier to get by using an online financing company, even if you have bad credit. You can compare financing rates for the purchase of a new or used car, apply in minutes, and receive a blank check within days. Hidden Bank Loan Charges That Would Make a Pick-Pocket Envious There can be more to a bank business loan than making interest and principal payments. Your firm may get a great rate on its new credit line or term loan but you may cry on the way home when you discover the hidden fees and charges. Payday Loans - Bridging The Void Between Paychecks Emergency - the word is written everywhere in red and considered a danger sign. We all are afraid of what we will do if we encounter this emergency. Law Practice Finance How do you finance a growing practice? It is impossible to have a successful practice without good cases and managing good cases to a successful conclusion requires money for working capital. So, how does a growing practice secure the working capital it needs?Historically, growing practices in need of working capital have had limited financing alternatives. New Car Loans - How You Buy a New or Used Car With Poor Credit Consumers buy a new or used car with poor credit everyday. By using an outside lender, you can be assured you are getting the lowest rates on your car loan and put yourself in a better position to leverage for rebates and extras. Easy Cash Advance - Payday Loans Online are Quick Cash advances have become quicker to process with online payday loan applications. In as little as a minute, you can be approved for a cash advance and have the money in your checking account the next day. Understanding Personal Loans, Cash Advances and Payday Loans Have you ever been short on cash? Has an unforeseen event emptied out your wallet? Are you short on funds in-between paychecks? I am sure that many of you have found yourselves in this situation before. Don't want to borrow money from a friend or family member because you don't want them knowing your business? Now you don't have too. Bridge Loans: Everything You Wanted To Know As the name implies, bridge loans fulfill a vital need for active developers by giving life to a new project in the months before lenders feel confident enough to make available a construction loan, or a repositioning loan in the case of an existing project. But real estate bridge loans have other uses, both tactical and strategic, that make them indispensable in today's New York marketplace. How to Find a Loan or Mortgage with Bad Credit If you have bad credit and you are trying to get a personal loan or mortgage, it may seem like a difficult situation. However, there is hope. Finding the Right Bad Credit Loan UK If you live in the United Kingdom and find yourself in need of money but lacking in credit, you might want to consider applying for a bad credit loan UK. These loans often are offered in a variety of different ways, from secured loans to unsecured loans, and may be used to cover a variety of expenses. Quick Cash Advance Payday Loan - Get it Free or Cheap If you are looking at getting a payday loan or a cash advance loan, you probably already know that one of the main drawbacks to getting one of these types of loans is that the fees can be so high.The positive side of getting a payday loan or a cash advance loan is that they are so convenient. Refinancing Your Auto Loan Refinancing your loan is one of the best kept secrets around for saving you money, but most people never think of it. Whether refinancing your home or car the process is the same. A Brief History of Loans No one can say for certain where the history of loans began? it's likely that people have been practicing lending and borrowing for as long as there has been a concept of ownership.The history of loans can be documented at least several thousand years back; forms of lending were evident in ancient Greek and Roman times, and monetary loans were even mentioned in the Christian bible. High Risk Personal Loans - Revive Frustrated Loan Hunting Attempts with High Risk Loans Bad credit seems like an unfinished business, you can't shake it off, and you can't move on without putting it away. Unfinished business is meant to be finished. Secured Loans House the Most Positivistic Consequences of Loan Borrowing One of the most enduring myths of loan industry is that secured loans are perhaps the most favorable loan type available. And guess what this myth is in fact one of the most enduring truths ever. How to Find Cheap Loans UK For the individual in need of cheap loans UK, it can sometimes seem like the loan they seek is always just out of reach.The hardest part of finding cheap loans UK is usually sorting through the various types of loans to find the one loan that has the right interest rate and loan terms for your needs.
|
| home | site map |
| © 2006 |
