# What Does My Debt Cost Me?

### by Gary Foreman

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Have you ever asked yourself the question, "What does my debt cost me?" Borrowing money does cost you. You may be paying all your bills on time and have a good credit score. But, don't kid yourself; you pay a price for being in debt.

One source puts average consumer debt at these levels:

• Average credit card debt: \$15,611
• Average mortgage debt: \$155,192
• Average student loan debt: \$32,264

How much do those loans cost us? We went to industry sources to get some typical rates.

• mortgage using a 15 year fixed is 3%.
• low interest cards 11%
• new direct student loans 4.6%

If we apply those interest rates to the average balances, we get:

• Credit card annual interest: \$1717
• Mortgage annual interest: \$4655
• Student Loan annual interest: \$1484
• total: \$7856

Don't worry about how accurate the debt totals or interest rates are. That's not important. We're just illustrating how much being in debt can cost you.

You may owe more or less. You'll need to do your own calculation. You'll probably want to add in any auto, boat, or home equity loans.

To calculate your own cost of debt, you'll need current statements from your accounts. There should be a line telling you how much interest accrued during the statement period or what your balance and interest rate is. (Multiplying the amount owed by the interest rate tells you the annual amount of interest. i.e. a balance of \$1,000 times a rate of 12% = \$120)

You'll probably need to convert some interest costs, so they're all either monthly or annual.

Would you like to
in less time
for less money?

Let's take a look at our test family. The cost of their debt is \$7,856 per year or \$655 per month.

Most people are surprised at how much their debt is costing them, especially if they have more than one account. How much is your debt costing you? And what would you do with it if that money were available to you each month?

You probably have some good ideas. I'd be surprised if you didn't. So what's your cost of debt? And what are you willing to do about it?

Reviewed April 2017

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