$240 a month looks cheaper than $350 a month. But a lower monthly payment does not always mean a lower total cost.
In Money Mistake #1, compare two financing options:
$350 × 36 months = $12,600 total
$240 × 60 months = $14,400 total
The second option costs $1,800 more, even though the monthly payment looks cheaper.
This is an important personal finance lesson for beginners: when comparing financing, loans or debt, don't look only at the monthly payment. Check the repayment period and the total amount you will repay.
Before borrowing, ask two questions:
• Can I afford the monthly payment?
• What will I repay in total?
Money Mistakes Beginners Make is a new short series from Beginner's Personal Finance explaining everyday financial decisions clearly and practically.
Next: the credit-card number most beginners miss.
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