My best HELOC programs ( 10year interest only , 20year amortizing ) may be interestonly for the first 10 years while later adjusting to fully amortizing with principal and interest for a total loan term of 30 years . If I calculate these HELOC rates as interestonly for the first 10 years , the total blended rate payments would actually be even better .
To check your actual current blended rate debt as well as your potential future blended rate if you welcome a new HELOC loan , please enter your own consumer debt data ( loan amount , rate , and number of individual loans ) here to find out : Blended Rate Calculator .
The average borrower is in their home for about seven years , not 30 years . This is also about the average time period that a borrower holds one or two mortgage loans on their property before they later sell or refinance at a hopefully lower rate .
Snowballing or Compounding Credit Card Debt Examples
Credit card delinquency rates at small banks reached 7.51 %, the highest level ever recorded according to the St . Louis Fed .
Average credit card rates surpassed 28 % nationwide recently . However , retail store credit cards are now closer to 30 %. By comparison , credit card rates averaged closer to 12 % back in 2008 .
In the 3rd quarter of 2023 , new credit card delinquencies reached 7.2 %, according to the New York Fed Consumer Credit Panel and Equifax .
The average annual percentage rate ( APR ) for merchant cards , which many holiday shoppers will be using online or at nearby shopping malls , just hit 28.93 %. This is a new alltime record , up from 26.72 % in 2022 , according to Bankrate .
Credit Card Debt Payoff Examples
Now , let ’ s compare how much time and interest is required to pay off a credit card debt balance of $ 20,000 .
Many credit card issuers may have different minimum payment allowances , which may vary from a minimal fixed dollar amount up to the interest plus 1 % of the unpaid principal balance that ’ s paid monthly .
For example , let ’ s start with minimum payment example # 1 that includes just interestonly with no principal paydown each month :
Credit card payment # 1 : Unpaid credit card balance : $ 20,000 Interest rate : 28.93 % Annual interest paid for one year : $ 5,786 ($ 20,000 x 28.93 %) Monthly interestonly payments : $ 482.17 ($ 5,786 / 12 months )
If the borrower just pays the absolute minimum interestonly payment of $ 482.17 per month , it will take 41 years and 7 months to pay off the unpaid balance . If so , this is 11 years and 7 months longer than a brand new 30year fixed rate mortgage .
The total interest paid by the borrower over this time period would be $ 220,496.44 ( 11 times the original $ 20,000 balance ). To verify yourself , here ’ s the specific credit card payment example # 1 link on Calculator . net .
Credit card payment # 2 : Unpaid credit card balance : $ 20,000 Interest rate : 28.93 % Payment option : Interest + 1 % of principal balance Annual interest paid for one year : $ 5,786 ($ 20,000 x 28.93 %) Monthly interestonly payments : $ 482.17 ($ 5,786 / 12 months ) Payment of an extra $ 200 in principal ($ 20,000 x 1 % = $ 200 ) Total minimum monthly payment ( interest + 1 % of principal ): $ 682.17
The payment of the absolute minimum interestonly ($ 482.17 / month ) plus 1 % of the original $ 20,000 unpaid principal amount ($ 200 in principal ) for a grand total of $ 682.17 per month will take 4 years and 4 months to pay off the entire balance in full . The total interest paid will be $ 15,134.49 . To confirm yourself , here ’ s the specific link for credit card payment example # 2 on Calculator . net .
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