Are You Interested...

In what you are spending in interest?
I cannot believe how much I have already spent in interest in just 17 months of having my OSAP loan. Imagine I took the 120 months (making only minimum payments) to actually pay it back...

When I first graduated I was paying the floating rate which I am pretty sure was 6% interest. Since then, actually only a few months after I graduated prime went down and I was paying 4.75% for the rest of the time. I am so glad I chose the floating rate instead of the fixed rate! Just so you know, "floating" is prime plus 2.5% where "fixed" is prime plus 5%! Currently prime is at 2.25%.

Consider this: if I took the full 10 years (including grace period) at the floating interest rate it is now I would have paid $8003.36 in interest. If I took the fixed rate at the rate it is now I would have paid $12673.19 just in interest!! Craziness!

One thing many people get "tricked" on is the "grace period" they give you. Many people believe that during these 6 months there is no interest accumulating. Unfortunately that is wrong, you need to read the fine print. Interest starts accumulating the day you graduate. However, you do not have to make any minimum payments or pay the interest during these 6 months. If you are able to though it is great to make lump sum payments anyway to get decrease that interest building up.

You may be wondering how much interest  I paid over the 17 months (including grace period) I have been done for. Well just a bit of background, when I graduated I owed $5.95 A DAY in interest!! Earlier this month I got down to $0.14 wow that felt nice. Currently it is probably at $0.02 but it takes several days to update on the NSLC website. So in total, after 17 months (drum roll please) I will have paid $1247.15 in interest. Not too bad considering what it COULD have been.

If you would like to calculate how much you are spending in interest I recommend the Canlearn site or this Loan Calculator site which will show you your interest accumulated once you click "show/recalculate amortization table." Good to figure out what you are paying in interest to student loans, mortgage, family loans, car loans etc. Fun to play with!

Main advice: make lump sum payments in addition to your minimum payments whenever you can. It could literally save you thousands!!