How does interest and finance charges impact the cost of debt over time?

Interest and finance charges are the additional costs you pay for borrowing money. They are calculated as a percentage of the total amount borrowed and are added to the balance owed over time. The longer it takes to pay off a debt, the more interest and finance charges accumulate, which can significantly increase the total cost of borrowing.

For example, if you have a credit card with a balance of Rs. 10,000 and an interest rate of 18% per year, you will be charged Rs. 1,800 in interest for the first year if you make no payments. If you continue to carry the balance, interest will be added to the balance each month, and the total amount owed will continue to increase.

It's important to understand the impact of interest and finance charges on your debt and to pay off your debts as soon as possible to minimize these costs. This can include making more than the minimum payment each month, prioritizing highinterest debts, and exploring options for consolidating or refinancing debts to lower interest rates.