Total Cost of Borrowing

This chart shows the total cost of borrowing $20,000 at various interest rates and repayment periods.

Interest Rate

5-Year Loan

10-Year Loan

15-Year Loan

30-Year Loan

3% $21,540 $23,160 $24,840 $30,240
4% $22,080 $24,240 $26,640 $34,200
5% $22,620 $25,440 $28,440 $38,520
6% $23,220 $26,640 $30,420 $43,200
7% $23,760 $27,840 $32,400 $47,880

As you can see, borrowing can be costly, especially if you take out a long-term loan. It is important to look at other alternatives to borrowing before making a final decision.

Before you borrow, you should compare the after-tax interest rate you are earning on your assets to the after-tax interest rate you will have to pay to borrow money. For example, suppose you have the $20,000 you need in a savings account earning 1% interest. After paying taxes on your interest (e.g., at a rate of 25%), you are really earning an after-tax rate of 0.75%. Unless you can borrow money at an after-tax rate below 0.75%, you'd be better off using the money in your savings account (unless it is your emergency fund). See the following illustration of how this after-tax interest rate is arrived at.

a) Current Interest Rate


b) Marginal Tax Rate


c) Multiply (a) times (b)


d) After-Tax Rate of Return
Subtract: (a) minus (c)


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*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a Registered Broker-dealer (Member FINRA/SIPC) and SEC-registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. General Electric Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.