The Cost of Credit
Sometimes you need to borrow money, especially to pay for a large purchase such as a home or a car. It’s easy to focus on your monthly loan payment, but to appreciate how much borrowing money might really cost, you also need to consider the amount of interest you’ll pay over time. The following tables illustrate the total interest paid over the life of three common types of loans that have a fixed annual interest rate and a fixed repayment term: mortgage loans, auto loans, and personal loans.
Mortgage loans
A home is often the biggest purchase you’ll ever make. Loan repayment terms vary; this chart illustrates the total interest paid over a 30-year repayment term.
| Loan amount | 3% | 4% | 5% | 6% |
|---|---|---|---|---|
| $250,000 | $129,444 | $179,674 | $233,139 | $289,595 |
| $350,000 | $181,221 | $251,543 | $326,395 | $405,434 |
| $450,000 | $232,999 | $323,413 | $419,651 | $521,272 |
| $550,000 | $284,776 | $395,282 | $512,907 | $637,110 |
| $650,000 | $336,553 | $467,152 | $606,163 | $752,948 |
| $750,000 | $388,331 | $539,021 | $699,418 | $868,786 |
Auto loans
You may take out a loan to buy a new or used vehicle. Loan repayment terms vary; this chart illustrates the total interest paid over a 60-month repayment term.
| Loan amount | 2% | 4% | 6% | 8% |
|---|---|---|---|---|
| $15,000 | $775 | $1,575 | $2,400 | $3,249 |
| $20,000 | $1,033 | $2,100 | $3,199 | $4,332 |
| $25,000 | $1,292 | $2,625 | $3,999 | $5,415 |
| $30,000 | $1,550 | $3,150 | $4,799 | $6,498 |
| $35,000 | $1,808 | $3,675 | $5,599 | $7,580 |
Personal loans
A personal loan is unsecured, meaning that no collateral is required, so the interest rate on this type of loan is typically higher than for a secured loan. Loan repayment terms vary; this chart illustrates the total interest paid over a 36-month repayment term.
| Loan amount | 6% | 8% | 10% | 12% |
|---|---|---|---|---|
| $8,000 | $762 | $1,025 | $1,293 | $1,566 |
| $10,000 | $952 | $1,281 | $1,616 | $1,957 |
| $12,000 | $1,142 | $1,537 | $1,939 | $2,349 |
| $14,000 | $1,333 | $1,794 | $2,263 | $2,740 |
| $16,000 | $1,523 | $2,050 | $2,586 | $3,131 |
Content provided by Forefield for use by Eliot M. Weissberg, CFP®, CFS, of Raymond James Financial Services, Inc., Member FINRA/SIPC. The Investors Center, Inc. is an independent company. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from various sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Eliot Weissberg and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.
This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Past performances may not be indicative of future results. You should discuss any tax or legal matters with the appropriate professional.
M20-2938960 through 2/5/21
