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Pay your debt quickly if you don't want give your hard earned income in compound Interest

Pay your debt quickly if you don't want give your hard earned income in compound Interest

The Rule of 72 shows how interest can work for you...Or against you

This concept can show how your money can double in savings. It can also demonstrate the approximate amount of time it takes for your debt to double at a constant rate of return compounded over time.

This simple example shows how it works:

Mary owes $10,000 on a loan, and the interest rate she’s charged is 12% per year compounded annually. If she doesn’t make any payments, at this interest rate it would take six years for the amount she owes to double.

The Rule of 72: 

72 ÷ 12 = 6

Rule of thumb: Pay down debt quickly. And, make sure extra payments are applied to the principal.

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