How much interest will you pay over the course of your lifetime? If you add up all the interest the average person spends on mortgage payments, car loans, and credit cards, the aggregate number is pretty starting: $279,000.
That’s the amount of total dollars spent (or wasted, depending on how you look at it), over a consumer’s lifetime when you factor in the typical use of debt, loans, and finances. But that number could easily jump higher for some consumers, or even in some parts of the country where costs for homes, as an example, are much higher.
Consider that the $279,000 in interest paid number assumes:
-A single 30-year mortgage with a 20% down payment on a home at the national average.
$226,000 in lifetime interest.
-Nine auto loans over the course of your life (at approximately $22,750 each.)
$40,000 in lifetime interest.
-Around $2,000 in revolving credit card debt.
$13,000 in lifetime interest.
A couple of interesting notes about these numbers:
These figures don’t even take into account student loan debt, which recently eclipsed a trillion dollars nationally and is on the rise. In fact, the average college graduate enters the workforce wit $29,000 of student loans, which amounts to about $11,000 or more in interest until they pay it off (factoring a 10-year repayment at 6.8%).
The survey also calculates interest payments per state, not only due to the average home price, mortgage amount, etc. there but based on the average credit score for that state.
So states with lower home values but that have marginal credit scores will end up paying just as much interest – or even more – than some states where home prices are higher but the population manages their credit better.
For instance, people who live in Washington, D.C. have some of the highest home prices, with the average new mortgage amount now $462,000. But they also have an average credit score of only 656 – not even considered a fair score, not even good.
In combination, that means the typical consumer in Washington, D.C. will pay $451,890 in interest, which is the most in the U.S.
On the other end of the spectrum, the population of Iowa enjoys an average mortgage of only $120,467, the lowest in the country. But Iowans also have a solid average credit score of 689, which yields lifetime interest payments of only $129,395 – also the lowest in the U.S.
Consumers in these 10 states pay the most interest over their lives:
1 Washington, D.C. ($451,890)
2 California ($368,745)
3 Hawaii ($312,747)
4 New Jersey ($309,500)
5 New York ($300,031)
6 Maryland ($294,720)
7 Virginia ($280,516)
8 Washington ($267,964)
9 Massachusetts ($261,220)
10 Colorado ($255,232)
Consumers in these 10 states pay the lowest total interest:
1 Iowa ($129,394)
2 Nebraska ($137,174)
3 Wisconsin ($144,127)
4 Maine ($154,340)
5 North Dakota ($157,011)
6 South Dakota ($157,136)
7 Montana ($160,849)
8 Pennsylvania ($163,513)
9 West Virginia ($166,232)
10 Vermont ($167,042)
How where do Californians fare on this lifetime interest payment index?
For the average resident of the Golden State there will be $747,332 in lifetime mortgage debt, $18,000 in car loans (one every seven years,) and $5,750 in revolving credit card debt.
For those with a fair (639-679) credit score, that equals $636,895 in lifetime interest payments.
But for those with an excellent (740+) credit score, they will only pay $507,587 in total interest.
That savings – almost $130,000 just for maintain a good credit score – could be the key to being financially comfortable. With a good credit score and lower interest payments, consumers can put more money in savings, pay off credit cards and auto loans faster, pay off their mortgage in shorter time, invest for more gains, and plan for retirement.
No matter how you slice these numbers, the opportunity cost of keeping a good credit score – and paying less interest over your lifetime – is a no brainer.
