24 August 2020

Debt kills options – period!

A couple of decades ago, a friend of mine had a small credit-card balance of a few hundred pounds and was paying just about the minimum payment monthly. He also had a payment-protection insurance which he paid monthly. The trouble was, despite paying the minimum monthly payment and the payment-protection insurance, the balance was not reducing at all. My friend was flummoxed. He did not realise that paying the minimum monthly payment barely covered the extortionate interest rate, and, if not for timely intervention, it would take decades to pay off just a few hundred pounds. When he told me about it, I volunteered to pay off the debt if he would cut up the credit card and become financially literate. He agreed. The first thing I did was cancel the useless payment-protection insurance and then paid off the balance in about three instalments. Since then, my friend has become quite financially astute. He has one or two credit cards now but pays the full balance monthly.

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