Calculating and revealing exactly how much interest I'm charged every month on bank loans and card loans | Currently repaying about 6 million yen in debt
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Last time, I wrote about what beginners in side hustles should do first, based on my own failures.
This time, I'm returning to the topic of debt.
"How much interest am I actually being charged out of my monthly repayments?"
I've been curious about this for a long time, so I properly calculated everything for each lender.
The numbers that came out were higher than I expected, so I'm going to reveal them honestly.
First, the breakdown of my borrowings
My total debt is approximately 6 million yen.
Roughly speaking, the breakdown looks like this.
Bank loan (larger one): approx. 3 million yen / 6.5% interest rate
Bank loan (medium one): approx. 2.5 million yen / 7.0% interest rate
Card loan (first one): approx. 360,000 yen / 15% interest rate
Card loan (second one): approx. 130,000 yen / 15% interest rate
I have two bank loans and two card loans. I have a total of four borrowings.
*These are bank-affiliated loans and credit card loans, not consumer finance loans.
I calculated the monthly interest for each lender
I divided the interest rate by 12 to calculate how much interest is added each month.
Bank loan (6.5% / approx. 3 million yen) → approx. 16,000 yen per month
Bank loan (7.0% / approx. 2.5 million yen) → approx. 15,000 yen per month
Card loan (15% / approx. 360,000 yen) → approx. 4,500 yen per month
Card loan (15% interest, approx. 130,000 yen) → approx. 1,700 yen per month
When you add all of this up, more than 30,000 yen per month disappears as 'interest'.
I pay back 73,000 yen every month, but the principal only decreases by 35,000 yen.
My monthly repayment amount is about 73,000 yen.
If more than 30,000 yen of that is interest, then the actual principal (the amount I borrowed) is only decreasing by about 35,000 yen per month.
In other words, nearly half of the amount I am repaying is disappearing into interest.
When I laid out the numbers, I couldn't help but laugh.
I thought, 'Isn't it impossible to pay this back with just my salary?'
I didn't look at it properly before
To be honest, I hadn't really looked at these numbers before.
I think that's why I was able to stay calm.
If the version of me from before I started my side hustle had faced these numbers head-on, I think my personality would have caused me to break down at some point.
I might have given up halfway, thinking, 'There's no way I can pay this back.'
But things are a little different now.
That's because I have 'another means' at my disposal: my side hustle.
Even when I face the numbers, there is a tiny bit of hope left that says, 'I might be able to do something about this.'
That's why I feel like I've become able to look at them calmly.
I realized that even with the same numbers, how you perceive them changes completely depending on whether or not you have a weapon in your hands.
The most brutal one is the 15% interest card loan
When I lay them out like this, the toughest one is definitely the card loan with 15% interest.
Even though the amount is smaller than the bank loan, the impact of the interest is brutal.
That is why I want to pay off this card loan first.
If I don't pay it off early while the amount is still small, I will end up paying high interest indefinitely. This is something I want to address as soon as possible.
Still, I'm glad I did the calculations.
Looking at the numbers again, my honest thought is that it's going to be quite tough.
If I just keep making regular payments, I'll be eaten alive by interest and end up broke.
Therefore, I have no choice but to increase my income and make early repayments.
The answer is simple, but it is not easy.
Even so, I am glad I did these calculations.
Knowing exactly how much interest I am paying makes it clearer where I need to focus my efforts, rather than just vaguely continuing to pay without looking.
For those who feel like they can't see the light at the end of the tunnel with debt repayment, I recommend calculating the interest for each lender at least once.
Numbers are scary when you look at them.
But it is even scarier to keep going without looking at them.😊
Next time, I plan to summarize everything I've researched on the topic of "What is voluntary liquidation actually like?"
▼ For those who are struggling with interest and repayments and want to look into it (PR)
The burden of interest can sometimes feel lighter just by getting a free consultation instead of carrying it all on your own.
If you are interested, please take a look at the free debt consolidation consultation.
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