Why borrowing money can cost you more 😱

published on July 15, 2020

You're broke Why?! But you still have to live What about using a credit card, just to tide you over? Credit can be handy, but when you borrow money, you create debt If you can't pay it back in time, you'll be charged interest and your debt will slowly grow

Tunde has been lusting after a designer handbag that is, amazingly, half price She has no cash right now, so she buys it on her credit card for 1000 bucks Credit card companies let you borrow money, but they charge a high rate of interest Let's say Tunde's rate is 16%

If she just pays the minimum repayment of $25 per month, it would take Tunde nearly five years to pay off her handbag and it would end up costing over $400 more However, if she pays $100 each month, she can pay the full debt in 11 months with only $65 in interest Better still, if Tunde had waited and saved up the cash,

She'd only pay the true price of $1,000 Fees for borrowing money can also sneak up on you Tunde has to pay a yearly fee just to use the credit card and she'll get charged a penalty if she doesn't make the minimum repayment So what about buy-now-pay-later services that let you buy something right now

And pay it off in instalments over several weeks It seems like they only charge a small fee, but if you miss a payment because there isn't enough money in your account, they charge you a much bigger one Plus your bank will charge you too for dishonoring the debt My five cents is borrowing is easy,

But getting out of debt can be really hard It's hard to remember when something is begging you to buy it, but the true cost of borrowing money, it might be way more than it's worth

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