Paying your loan is like renting equipments.
You see, interest rate is like the rent cost of money. Its like you are employing someone elses money and you have to pay that money salary. In money, the moneys salary is often stated in terms of the ratio between money borrowed and how much you have to pay for borrowing such money. That ratio is called interest rate.
For example, if you borrow $10,000 and you have to pay $3,000 per year for not paying that $10,000 then your interest rate is $2,000/$10,000=30%. Simple?
Thats assuming that the money you borrow is constant, namely $10,000. If you dont pay your interests, then the $3,000 is added to your loan. So next year, you owe $13,000. Two years from now, youll owe $16,900. Got it? In Math, few functions increase faster than exponential function, and this is one of it.
If you borrow some money at 30% interest rate from a credit card company and 9.9% interest rate from your mortgage, then you are paying more money for your credit card company for every unpaid dollar loan.
Each dollar from a credit card company costs 30 cents per year, while each dollar from your mortgage costs 9.9 cents per...
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