ONCE, after a particularly heavy spending month, I saw on my credit card statement it would take me 54 years and two months to pay off my card if I made only the minimum payment each month.
That message certainly drove home the cost of borrowing and reminded me how important it is to regularly review all debts and shop around to keep interest charges as low as possible.
"By all means look for flexibility in making extra payments," I told friends who came to me for advice on taking out their first mortgage. "And try to avoid the 25-year amortization: aim to pay off the mortgage in 20 years or less."
Paying those few extra dollars every week or month will save tens of thousands of dollars over the life of the mortgage because so much more of each payment will reduce the mortgage instead of mostly paying only the interest.
But the bottom line is the total cost of repaying the debt. That's what you need to compare from one lender to the other.
On a smaller scale, realize the convenience of credit cards comes at a cost. Some cards charge as much as 30 per cent a year on the unpaid balance. That's $300 for every $1,000 outstanding. Because the interest is charged monthly, you don't readily see the annual cost.
If you don't pay off your cards in full every month, you might benefit by consolidating your credit card and other expensive debt and replacing it with a cheaper loan or mortgage, but only if you then put away the credit cards and avoid running up other debt again or else you will end up with double your previous debt load.
Another approach to cutting interest costs involves replacing non-deductible, personal debt with deductible investment or business debt.
Get expert advice to see if it makes sense, for example, to use savings to pay off personal debt, then borrow to invest in the stock market, revenue real estate, a business, etc.
Mike Grenby is a columnist and independent personal financial adviser; he'll answer questions in this column as space allows but cannot reply personally. Email: firstname.lastname@example.org.