Yes, I thought of opportunity cost. Let's say you're very lucky and can get a guaranteed 5% return. Using my example, I pay $504 if I pay for the full term. I have to pay an extra $3.50 each month if I go monthly (not counting the extra stamps and inconvenience), for a total of $21 in fees.
You might think I could earn $12.60 by banking the money ($504 * .05 * .5), which even if true doesn't compensate me for the fees. But wait -- it's worse than that -- the principal is going down each month by $84 PLUS that $3.50 convenience fee.
When I do a quick calculation in Excel, I figure I would earn $5.03 in interest over the 6 month period by paying monthly. Take out taxes from that, and maybe that leaves you with $4.50 -- that doesn't come close to compensating me for my $21 in fees.
Last edited by sweeps : 04-14-2008 at 07:23 AM.
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