Getting out

Three debts. Two thousand five hundred euros, eight hundred, six thousand.

And five hundred euros a month to put against them. Where do you start?

Their rates: eighteen per cent, nine, three. These are not the same debts.

Eighteen per cent on two thousand five hundred euros. That is the credit card.

Two methods exist, and they do not point at the same debt first.

The snowball: the smallest balance first. Eight hundred euros.

You clear it fast, you watch one disappear. That is a morale argument, not a maths one.

The avalanche: the highest rate first. Two thousand five hundred, at eighteen per cent.

Forty-three euros and thirty-five cents. Over twenty months.

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That is all. And both methods finish in exactly the same month.

Four hundred and ninety-one euros of interest against four hundred and forty-eight.

So take the one you will keep up. A method you abandon costs far more than forty-three euros.

But what if you do not have those five hundred euros a month?

Debt consolidation rolls all three into a single, longer loan.

One hundred and thirty-five euros and eighty-six cents a month, instead of five hundred.

You can breathe. That is real, and it is exactly what is being sold to you.

And you pay two thousand one hundred and twelve euros and twenty cents of interest.

Against four hundred and forty-eight, repaying it yourself over twenty months.

Almost five times more. Consolidation is not a mistake: it is a trade, and you must see it.

That leaves the car loan. Six thousand euros, three per cent.

A bonus comes in. Can you clear it in one go, and at what price?

Zero. Below ten thousand euros over twelve months, the law provides for none.

Above that, it is one per cent of the capital repaid. Half a per cent with under a year left.

On a mortgage it is another matter. One hundred and fifty thousand euros outstanding.

Three per cent of the capital, or six months of interest. The law keeps the smaller of the two.

Two thousand six hundred and twenty-five euros. And that is a ceiling, not a price.

It is negotiable, and it sometimes falls to zero when you refinance with the same lender.

Getting out of debt is not a hard calculation. It is a decision people postpone.