powerpay

PowerPay Description SheetRevised 2005Marsha A. Goetting Ph.D., CFP®, CFCSProfessor & Extension Family Economics SpecialistDepartment of Agricultural Economics & EconomicsPay credit payments as usual•First loan: $150•Second loan: $50•Third loan: $75•Total $275PowerPay•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 $275PowerPay•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 $275PowerPay•Continue until all loans are paid off.Benefits•Reduce time on loan•Save in interest costsPowerPay •PowerPay WorksheetPowerPay •Creditors•Balance Owed•Monthly Payment Usually paid•Annual Percentage Rate (APR)PowerPay OptionsAdding extra money tomonthly payment$10$25$50$100 or morePowerPay Options•One-time lump sum paymentAmount MonthYearConsolidating debts•List debts to consolidate•Interest rate•Monthly payment•Amount of fee for consolidationPowerPay Web site www.creditsmarts.montana.edu/powerpay.htmlAnalysis Summary•#1 Credit Card •Balance•Monthly payment•Interest•# Months to pay offRepayment 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 PaidSummary of Benefits•Time required to pay off all debt reduced by:42 months•Amount of money saved:$1,417.21Reduction Calendar•Which loan is paid first?•That payment applied to highest rate loan--department storePowerPay Description SheetRevised 2005Questions??www.creditsmarts.montana.edu/powerpay.html