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Tue, Jul

Ramit Sethi Explains How Opting For Monthly Loan Payments Can Hurt Your Financial Progress: 'This Is Not A Financial Strategy. This Is A Trap.'

Ramit Sethi Explains How Opting For Monthly Loan Payments Can Hurt Your Financial Progress: 'This Is Not A Financial Strategy. This Is A Trap.'

Financial News
Ramit Sethi Explains How Opting For Monthly Loan Payments Can Hurt Your Financial Progress: 'This Is Not A Financial Strategy. This Is A Trap.'

Sethi explains that you can end up paying thousands of additional dollars by taking out a lengthy auto loan. While 30-year mortgages are the norm for homes, most people shouldn't be taking out seven-year auto loans.

You can find more affordable cars in the used car market and end up with a loan that has fewer years on it. Car dealers want you to think about covering something within your monthly budget because they can then have you commit to a long-term loan that has lower monthly payments. This may sound good at the moment, but interest payments will make the vehicle far more expensive.

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Pay Off Debt Quickly

A mortgage here and an auto loan there can quickly add up as you make your regular purchases each month. The gravity of debt can feel unsettling for people who are financially struggling, and that's why it is important to pay it off as quickly as possible.

If you make an additional payment toward your auto loan or mortgage each month, you get to directly reduce the principal instead of only making the amortized monthly payment. After paying off your auto loan, you can use that momentum to pay off your mortgage sooner.

It's incredibly freeing once you pay off your debt, but you shouldn't rush to put yourself in debt. Long-term loans restrict your ability to buy other products and services, and you should walk into any big purchase knowing how much you can afford. If you end up with a loan, it's a good idea to pay it off before it matures.

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This article Ramit Sethi Explains How Opting For Monthly Loan Payments Can Hurt Your Financial Progress: 'This Is Not A Financial Strategy. This Is A Trap.' originally appeared on Benzinga.com

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