Ehh, the bane of debt … it ain’t just the principal, but the vig.

But, conversely, could be good.

OK so there’s this thing called “compound interest,” or “compounding interest,” and what this does is make the original money more than the original money.

What?  Yeh.

OK so … think: credit cards. 

Everyone knows (well not everyone, which is why we are / how we got … here) that credit cards are actually short-term loan cards that should be paid off every month;* failure to do so results in the lender charging interest on that short-term loan.  *Fun little factoid: if you do, however, your credit score/#of the beast takes a small hit because banks don’t make as much money off you as opposed to carrying a balance … just sayin’ but eff(forget) them.

If the credit card / short-term loan card is not paid off in full – i.e., the loan fully repaid at the end of the “billing cycle” / short term loan term – then the credit card company /lender gets to charge interest (the vig) on the unpaid amount. 

Then the next month, if the unpaid loan with the vig added in is not paid off, then you (the collective we) get charged interest on the interest … vig on the vig.  Nice.

So that’s the bad.

The good?  If you (the collective we) earn interest on money in hand (say, in a savings account) then the good vig is added to the original money and then the original money with the good vig added in earns interest on that higher amount (original money + vig = bigger money).

So, say there’s $100.  And this $100 gets loaned out for a year at a vig/interest rate of 5%. 

At the end of the year, the borrower of the $100 must repay the $100 and the vig of $5 ($100 x .05 = $5), or $105.

BUT.  But … the borrower asks for another year to repay the original $100.  Now, the borrower has to repay the original money, the original vig, PLUS the added vig for the extra time.  Ooo look.

$100 x .05 = $105 (first year)

$105 x. 05 = $110.25 (second year)

That original $100 loan is now $110.25.  Money earned with patience instead of labor.

Yeh, it’s good to be the lender, and have the borrower take its time.

So compounding interest = good as the lender, horrible / no good / very bad as the borrower.

GOD tells us that, too.  {Proverbs 22:7}

Follow the Word in all things, and life becomes its own reward.