The Hard Truth about Easy Monthly Payments

by Joe Plemon on September 28, 2011

Vendors offer “easy monthly payments” to lure buyers into purchases they should probably be avoiding. The problem is that these easy payments do not make your life easier; they are actually a recipe for a lifetime of debt.

Here is why:

You will pay more.

If you purchase a $20,000 car at 8% interest for 7 years, your “easy“ monthly payments will only be $311.72 compared to $626.73 for a three year note. Those lower payments sound tempting until you realize you are paying an extra $3,622 interest for that option. Remember: “easy” has a price tag.

You will take on more debt.

Once you start down the easy payment path, you will rationalize buying more stuff you shouldn’t be buying. Using the car loan example above, if you are paying $315 less per month, you will be tempted to go buy that furniture set. After all, it is “only” $300 a month.

You will stay in debt longer.

Lower payments mean a longer term, so when you agree to those low monthly payments, you are actually saying, “I plan to stay in debt a long, long time.”

You might get addicted.

Once you start agreeing to those low monthly payments, it will be easier and easier to take on more monthly payments. You are slowly being sucked into a vortex of debt which steals your joy, your energy and your hope.

OK Joe, what am I supposed to do?” Great question. If you want different results, do the opposite of what you are doing now. Purge “easy monthly payment” from your vocabulary and attack your debt with sacrificially huge payments. After all, your goal is to get rid of the debt…not stretch it out. List those debts on a piece of paper, tape the paper to your fridge, draw a red line through each one as it disappears, and celebrate its demise.

Take a moment to imagine the freedom of having zero debt. Savor that feeling and go for it. You will never look back.

Readers: Have you ever fallen prey to easy monthly payments? If so, how did it happen? How is your debt battle going today?


{ 6 comments… read them below or add one }

krantcents September 28, 2011 at 6:46 pm

I identify with the phrase, there is no free lunch. The come on ads that drive crazy is no interest for a year. Someone is paying for those carrying charges and that affects their profit margin. If it is really a deal, what is wrong with it?


joeplemon September 30, 2011 at 8:20 am

Agreed!! If we truly believed that there really is no free lunch, we would become properly cynical about those come on ads. “No interest for a year” ads have so many fine print exceptions that very few consumers actually pay no interest. And even if they did, the prices are too high to start with. Vendors are NOT losing money when they make such offers.


Tiffany September 30, 2011 at 1:37 pm

Some people just don’t and many don’t care. So many people seem to want everything. The same goes for homes when you look at the price difference between a 15yr and 30yr mortgage it amazed me how many choose to go with the 30. Then they go out and get a car payment all to just pay off the car and turn around and get a new one…just crazy.


20's Finances September 30, 2011 at 8:42 pm

I agree that it people can get carried away with lowering their payment and prolonging the time they are in debt. It all starts with not buying things on credit, at least not furniture or appliances. And some (myself included) would say not buying cars on credit as well.


joeplemon October 1, 2011 at 1:36 pm

Crazy is a good word! Here are some interesting stats about a 6%, $225,000 mortgage:

The 15 year payment is $1,899.
The 30 year payment is $1,349. ($550 less)

After 10 years, the 15 year option has a balance of $98,210 while the 30 year balance is $188,292!

During that 10 year period, the borrower would have only paid down the principle on the 30 year loan by $36,708 while paying nearly $162,000 in interest!

Those facts are hard truth about easy monthly payments.


joeplemon October 1, 2011 at 1:39 pm

@20s Finances,
You are absolutely right. If we all took the stance of not buying ANYTHING on credit, those “easy payments” would not be a temptation. I, like you, do not buy cars on credit. If my wife and I don’t have the money, we don’t make the purchase.


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