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interests are not linear, also most credits and mortgages will have a commission when you pay down a percentage of it, at least in Europe
by danieldisu 6y ago
interests are not linear, also most credits and mortgages will have a commission when you pay down a percentage of it, at least in Europe
- hansvm 6y agoMortgages might be a poor example because of prepayment penalties, the ability for a lender to choose to apply an excess payment to future interest payments instead of the current principal, and all sorts of things (each situation is different, you just need to do the math). Something like a credit card or student loan in places where those are common might be better targets. They usually have ordinary compounding interest, and the delta in your net worth (assuming no other effects like taxes) between investing P dollars at an interest rate R for time T is identical to paying off P dollars of a debt at an interest rate R and waiting till time T has elapsed.