Debt
The two orders of clearing debts optimise different things
Paying the most expensive debt first minimises interest; paying the smallest first produces completed…
· 4 min read
Debt
Interest, order of repayment, and the difference between kinds of borrowing.
Debt
A minimum payment is calculated to move the balance slowly
The smallest permitted payment is set to cover the interest and a thin slice of the principal, which is why a balance repaid that way takes years to disappear.
Debt
Stretching a loan lowers the payment and raises the total
Term length moves the monthly figure and the amount eventually handed over in opposite directions, because…
· 4 min read
Debt
Secured and unsecured borrowing are different products, not different prices
Attaching an asset to a loan changes what the lender loses if you stop paying, and that single difference…
· 4 min read
Debt
Clearing a debt returns a known number, and that is what makes the choice hard
Money used to reduce borrowing earns a return equal to the rate avoided, with no uncertainty attached…
· 3 min read
Debt
Consolidation moves a debt into one place without making it smaller
Combining several balances into a single loan changes the payment, the term and the number of statements…
· 4 min read
Debt
The cost of borrowing is quoted in several ways that do not compare directly
Two loans advertised with similar-looking numbers can cost very different amounts, because the numbers are…
· 3 min read
Debt
A credit limit is an offer from a lender, not money the household has
Available credit sits in an account looking like a resource, and treating it as one changes spending…
· 4 min read
Debt
Paying at the till in instalments turns a price into a payment
Point-of-sale credit rearranges the decision being made, replacing a comparison against what you have with…
· 3 min read
Debt
A missed payment costs considerably more than the payment
Falling behind triggers charges, changes the terms available and starts a cascade, which is why the useful…
· 3 min read
Debt
A credit file records behaviour, not character or income
The record lenders consult contains a specific and fairly narrow set of facts, and most of the things…
· 4 min read
Debt
A guarantor takes on the whole obligation and receives none of the money
Standing behind someone else’s borrowing is a legal commitment to repay it, which is a much larger…
· 3 min read