How Much the Average American Will Pay in Interest Over a Lifetime

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If you haven’t already, you will likely find yourself borrowing money from big banks at some point in your life.

While being “in debt” can have a negative connotation, taking out a loan opens up all kinds of opportunities. Student loans help you finance your college education so you can land the job of your dreams, while a mortgage gets you into your first home. Not to mention that making all those monthly bill payments on time helps increase your credit score, to ensure you get more funding in the future.

Despite the advantages of having access to different types of credit, however, paying interest on various loans over the course of your life certainly adds up.

To select looked at the interest paid by consumers on loans typically taken out throughout life. We’ve found that the average American with a mortgage on a median-priced home, a payment for a used car, an average credit card balance, and a student loan burden can end up paying $ 164,066 in interest alone. During his life.

This 6-digit number does not take into account any mortgage loans or additional auto loans taken out, or other types of financing, such as a Personal loan, which you can get with home repairs or a major purchase. For this reason, the total amount of interest you pay could be even higher.

Below is a breakdown of how we calculated the total interest paid on a mortgage, car payment, student loans, and credit card debt over the lifetime of the average American. .

Mortgage interest paid over a lifetime: $ 142,614.31

To calculate the mortgage interest paid over a lifetime, we used the median selling price of a new home sold in the United States in the second quarter of 2021, which was $ 374,900. Keep in mind that the interest calculation would change for homeowners who haven’t purchased their home this year.

The average APR for the 30-year fixed-rate benchmark mortgage is at 2.78% at the time of writing this article. Using Bankrate Mortgage Calculator, we found that someone buying a mid-priced home with a typical 20% down payment would owe $ 142,614.31 in interest over the 30-year term of their mortgage. This does not take into account any mortgage interest tax deductions which you may be entitled to as a homeowner, which could reduce your annual tax burden.

How High Yield Savings Can Help Lower the Interest You Pay

Consider spending more money on your deposit in the first place so that you can afford to take out less mortgage and possibly get a lower interest rate.

A high-yield savings account like the Ally Online Savings Account is a great place to save for a down payment on a house. It offers an above-average APY, with no monthly fees or minimum balance requirements, and account holders can create up to 10 different ‘buckets’ within the same savings account that represent designated funds for certain things, like naming a “Future Home”.

Ally Bank Online Savings Account

  • Annual percentage return (APY)

  • The minimum balance

  • Monthly fee

    No monthly maintenance fees

  • Maximum number of transactions

    Up to 6 free withdrawals or transfers per statement cycle * The withdrawal limit of 6 cycles of instructions is removed during the coronavirus outbreak under Regulation D

  • Excessive transaction fees

  • Overdraft fees

  • Offer a checking account?

  • Offer an ATM card?

    Yes, if you have an Ally checking account

Auto loan interest paid over life: $ 5,833.38 for used car owners, $ 4,450.96 for new car owners

According to The latest state of the Experian auto finance market, the average new car loan in the first quarter of 2021 was $ 35,392, while the average used car loan was $ 22,375. New car loans had an average term of 69.50 months with an average APR of 4.12% while used car loans had an average term of 65.74 months and an average APR of 8.70% .

Using NerdWallet car payment calculator, we found that the average new car owner would pay $ 4,450.96 in interest only over their 69.50 month loan. The average used car buyer would pay $ 5,833.38 in interest on their average loan. Although the used car buyer borrows less money for a shorter term, their interest rate is more than double that of the new car buyer.

Student loan interest paid over a lifetime: $ 5,994.07

The average public university student borrows $ 30,030 to get a bachelor’s degree. Since average interest rates vary widely depending on the type of student loan you have, we used the federal loan data as these loans constitute about 92% of all student loans.

For the purposes of our calculation, we used this year’s fixed federal interest rate for subsidized and unsubsidized direct loans to undergraduate students, which was 3.73%.

At this rate, using Bankrate’s student loan calculatorWe found that the average student loan borrower on a 10-year standard repayment plan will pay $ 5,994.07 in interest only over a 10-year period.

How refinancing can help private student loan borrowers

Private student loan borrowers should keep in mind that private loan interest rates are generally higher than federal loans. You could end up paying more in total interest. For this reason, consider refinancing your private student loans at a lower interest rate.

Serious student loan refinancing offers both low fixed and variable interest rates, flexible loan terms between 5 and 20 years, no set-up, late or disbursement fees, as well as a 9-month grace period if you have any difficulty in repaying your refinanced loan. Earnest particularly sets itself apart by allowing applicants with fair credit (minimum credit score of 650) to qualify, which most refinance lenders do not offer.

Serious student loan refinancing

  • Cost

    No origination fees to refinance

  • Eligible loans

    Federal, private, graduate and undergraduate loans

  • Types of loans

  • Variable rates (APR)

    From 1.99% (rates include a 0.25% auto-pay discount)

  • Fixed rates (APR)

    From 2.98% (rates include a 0.25% automatic payment discount)

  • Loan conditions

    Flexible conditions between 5 and 20 years

  • Loan amounts

    A minimum of $ 5,000, up to $ 500,000 (California residents must apply for a refinance of $ 10,000 or more)

  • Minimum credit score

  • Minimum income

  • Authorize a co-signer

Lifetime Credit Card Interest Paid: $ 9,624.24

The average credit card balance is $ 5,315, according to The latest Experian study on consumer debt. While the average credit card APR is 16.30% in May 2021, according to the The most recent data from the Federal Reserve, for the purposes of our calculation, we have used a fixed APR of 16%.

Assuming the average credit card holder makes a minimum payment which is calculated as 2% of their balance, using Bankrate Credit Card Calculator we found that it would take 376 months – or just over 31 years – to get rid of their credit card debt. During that time when they would only make the minimum payment, they would pay $ 9,624.24 in interest only.

Sure, pay more than the minimum is a simple way to speed up your credit card debt repayment and dramatically reduce your total accrued interest. We always recommend that cardholders pay their credit card bill in full and on time each month.

Get help to permanently pay off your credit card balance

While borrowing money to finance college or a first home is generally considered a financially sound decision, having a credit card balance is a big no-no thanks to their high double-digit interest rates.

Balance transfer cards allows you to transfer your existing credit card debt to a new card with a 0% APR introductory period so that you can pay off your outstanding credit card debt within a set time frame and you don’t have to worry about accumulating additional and costly interest charges.

For example, the American bank Visa® Platinum card offers 0% introductory interest for the first 20 billing cycles on balance transfers and new purchases (after, 14.49% to 24.49% variable APR; balances must be transferred within 60 days of the opening of the account). This is a long period of time during which you can reduce your credit card debt without it increasing month by month (as long as you don’t put extra charges on the card). Introductory 0% APR applies to balance transfers made within 60 days of account

American bank Visa® Platinum card

On the secure site of US Bank

  • Awards

  • Welcome bonus

  • Annual subscription

  • Introduction APR

    0% for the first 20 billing cycles on balance transfers and purchases *

  • Regular APR

    14.49% – 24.49% (variable) *

  • Balance transfer fees

    Either 3% of the amount of each transfer or $ 5 minimum, whichever is greater

  • Foreign transaction fees

  • Credit needed

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.

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