I’ve seen this commercial numerous times but still don’t remember the debt relief service name. But that shouldn’t matter as the question I have is about the hapless over-spender. He claims to have $47,000 in debt that would take 59 years to pay off. The service manages to drop that to $27,000.
At any rate what kind of interest and monthly payments does this guy have to take that long to pay off?
According to a ‘minimum payment’ calculator, 47,000 with 29% interest and a minimum payment of the interest plus 1% of the balance, it’ll take 43 years. So…higher interest or an even lower payment than that.
I don’t think you can answer this definitely without knowing either interest or monthly payments.
You can go to ‘loan calculator’ sites and plug in $47000, and 59 years, and pick any interest rate to find what the monthly payments are.
Examples:
6% will be a $242montly payment
20% will be a $783 monthly payment
As indirectly pointed out above, the loan principal doesn’t really matter.
On any credit card debt at the current (usurious) interest rates, making the minimum payment will take 40-50 years to pay off the balance.
Or you can pay it off in a minute, if you have the principal handy as loose cash to throw at the loan. They “years to pay off” is all about how much you can afford to pay each month.
The debt service commercial is misleadingly using the minimum payment as a way to maximize the horror of the “before” case. After they get the lender to give some degree of debt write-off, and get the debtor to pay far more than the minimum every month, miraculously the time to pay off drops from 50ish years to 5. With most of that heavy lifting being done by the greater monthly payment. Which if the debtor could afford after hiring these folks, they could also afford before hiring these folks.
Bolding a very important sentence that these services never tell you about.
If there is a debt writeoff/write down, that is a big hit to your credit score. Hope you don’t need to buy a car, get a mortgage, or possibly rent a new place afterwards as that ding will cost you extra in your loan because of a higher interest rate.
Not a debt relief service, but after seeing one too many CashNetUSA commercials, I checked out their rates. 229% - 299% API.
These places are quite scammy, sometimes outright scams. Because of their bad reputation creditors may refuse to work with them in debt reduction programs.