The Legend of Albert Einstein

When the name Albert Einstein comes up many people are very familiar with the name and immediately put his name with the Nobel Prize that he won in Physics. Albert Einstein made many contributions to physics that include the special theory of relativity as well as the mass energy equivalence. Albert Einstein known worldwide to many people as a great German-American scientist but very few people are unaware that Albert Einstein once quoted that "compound interest is the greatest force in the world".

With the sub prime loan bust happening nationwide and many people taking extreme interest in the mortgage industry, the quote by Albert Einstein may seem very ironic. Compound interest was once even referenced by Johnny Carson on the Tonight Show in 1990 as a weapon that was created by Scientists that killed peopled and left building standing and it was known as the 17% interest rate.

Today, compound interest is more important than ever before as many people are looking for the best way to make every dollar count. While there is a lot of blame that can be put on the sub prime loan bust for the reason why so many people struggle with their home loans, there is also the lack of understanding that many people have of how loans work and compound interest can be very confusing.

In simple terms, compound interest is the interest that is paid on the entire loan amount each month. While many people have pre determined amounts in which they may pay on a mortgage each month or even on a credit card payment, they may not be aware that only a very small portion goes to the principle of the amount financed. How is this possible? With compound interest, the interest is added to the principle of the loan each payment that the entire loan from the date of origin.

A person who is looking at the big picture of their finances and becomes educated in compound interest will find that in order to not pay high interest rates over the course of a loan it is imperative to pay more than the indicated amount on the statement. While the savings may not be seen at first since more money is going out, in the long run plenty of money will be saved.

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