We all love new, shiny, and trendy items! However, many people do not pay for things outright with cash or a debit card! They take out loans and/or use credit cards to purchase things they cannot afford! As if this is not a big enough problem, the average American cannot tell you the interest rate that will be paid as a result of using this borrowed money! Let me help you out a little bit. Here are the average interest rates in the United States for common debt types in 2020!
Based on 2020 Values
Credit Card: 16.05% (Creditcards.com)
Car: 4.22% and depreciates in value by approximately 60% in four years.(Bankrates.com)
House Mortgage: 30 Year-Fixed 2.86% and 15 Year-Fixed 2.44% (Nerdwallet.com)
Personal Bank Loan: 9.34% (Federal Reserve)
Medical Bills: 9.34% (Forbes)
Student Loan (Undergraduates) 2.75%, (Graduate Students) 4.30%, (Parents and Graduate PLUS Loans) 5.30%. (Investopedia.com)
Let's run these percentages with the average debt amounts in the US.
Credit Card: $6,194 + $994.14 = $7,143.14
Car: $38,948 + $1,643.61 = $40,591.61
Personal Bank Loan: $11,657.49 + 1,088.81 = $12746.30
Medical Bills: $2,200 + 205.48 = $2,405.48
Student Loan (Undergraduates) $36,520 + $1,004.30 = $37,524.30
Student Loan (Graduate Students) $36,520 + $1,570.36 = $38,090.36
Student Loans (Parents and Graduate PLUS Loans) $36,520 + $1,935.56 = $38,455.56
To many, these numbers may come as a shock! But these are the average prices one must pay in order to purchase things that they cannot typically afford. Like Dave Ramsey says, "A lot of the worst car accidents happen on the showroom floor!" Next time you borrow money, think about these numbers. In order to become a millionaire, one must be intentional with the money one has, not borrowing their way through life without paying the sacrifice of wealth!