PowerPay Description Sheet
Revised 2005
Marsha A. Goetting ®, CFCS Ph.D., CFP
Professor & Extension Family Economics Specialist Department of Agricultural Economics & Economics
Pay credit payments as usual
• • • • First loan: $150 Second loan: $50 Third loan: $75 Total $275
PowerPay
• When first loan is paid off, that payment is applied to the next loan.
First Loan Paid Off
• First loan: 0
• Second loan: $150 + $50 = $200 • Third loan: $75 • Total $275
PowerPay
• When loan 2 is paid off, add that payment to next loan.
Second Loan Paid Off
• • • • 1st & 2nd loan: 0 Third loan: $275 ($150 + $75 + $50) Total $275
PowerPay
•
Continue until all loans are paid off.
Benefits
• Reduce time on loan • Save in interest costs
PowerPay
• PowerPay Worksheet
PowerPay
• Creditors • Balance Owed • Monthly Payment Usually paid • Annual Percentage Rate (APR)
PowerPay Options
Adding extra money to monthly payment
$10 $25 $50 $100 or more
PowerPay Options
• One-time lump sum
payment
Amount
Month Year
Consolidating debts
• • • • List debts to consolidate Interest rate Monthly payment Amount of fee for consolidation
PowerPay Web site
www.creditsmarts.montana.edu/powerpay.html
Analysis Summary
• • • • • #1 Credit Card Balance Monthly payment Interest # Months to pay off
Repayment Schedule
• Without Power Payments (On left) • With Power Payments (On right)
Repayment Schedule
• Department Store is listed first because it has the highest interest rate--21%
Repayment Schedule
• • • • • Total Monthly Payments Months to Repay Loan Amount Repaid Interest Paid Total Amount Paid
Summary of Benefits
• Time required to pay off all debt reduced by:
42 months
• Amount of money saved: $1,417.21
Reduction Calendar
• Which loan is paid first? • That payment applied to highest rate loan--department store
PowerPay Description Sheet
Questions??
www.creditsmarts.montana.edu/powerpay.html
Revised 2005