Credit, loans, debt v3

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Credit, loans, debt v3

  1. 1. Credit
  2. 2. Why should you have a plan for your money? 1. So your basic needs are covered 2. So you can get what you want (when you can afford it) 3. So you don’t overspend 4. So you don’t have to get all stressed out or feel guilty about what you spend
  3. 3. Financial Planning Step 1: Think itS.M.A.R.T. goals are goals that are: S – Specific M – Measurable A – Attainable R – Realistic T – Time Based
  4. 4. Financial Planning Step 2: Track it Keep track of your income for a month: Paychecks…………………………. $600 Allowance………………………….$80 Gas money from friends…….$40 Total…………………………….…..$720 Keep track of how much you spend in a month: Lunch….……………………………. $160 Gas…………………………………… $80 Cell Phone Bill………………..….$95 Netflix……………………………….$9 Car Payment…..…….…………..$200 Total………………………………..$544
  5. 5. Financial Planning Step 3: Plan ItGet it on paper1. Write down your income – be specific2. Write down your PYF goal3. Write down your expenses – be specific4. Do the math.
  6. 6. IncomePYF GoalExpensesBalance
  7. 7. BalanceBalance your budget by subtracting your expenses from your income.
  8. 8. Financial Planning Step 4: Do it1. Commit Only spend what you have planned to spend2. Stay on track Using your tracking system… Track your spending and compare it to your plan. Track your income and compare it to your plan. Often.3. Adjust as needed Income increases. Or decreases. Goals change and you want to make a purchase that will require credit.
  9. 9. Let’s talk about credit.
  10. 10. What is Credit?1. The ability to get things before you pay for them because someone trusts that you will pay for the items in the future.2. Money someone is willing to loan to you.
  11. 11. What is Debt?1. The state of owing money2. The amount of money you owe
  12. 12. What is a Loan?Money that is borrowed and is expected to be paid back… with interest An installment loan is a loan repaid with a fixed number of equal payments.
  13. 13. What is Interest? Money you pay back on top of the money youborrowed. Why are you charged interest? Because you are delaying the repayment of money that was lent to you.
  14. 14. What is Principal?The actual dollar amount that someone has loaned to you.
  15. 15. What is APR? Annual Percentage Rate.Expressed as a percent of the amount borrowed. Translated into a dollar amount. This is what it will cost you to borrow money. This is the price of your loan.
  16. 16. What is Collateral? An asset promised as security for repayment of a loan. If you do not make your payments, the lender has the right to take your “collateral” as payment.
  17. 17. What is Secured Debt? Debt that is guaranteed by collateral.
  18. 18. What is Unsecured Debt? Debt that you guarantee only with your word.
  19. 19. What is Equity? The difference between the value ofyour collateral and the amount you still owe on the loan. Value – Principal Owed = Equity Your car is worth $14,000 You owe $8,000 Your Equity = $6,000
  20. 20. Why put down a Down Payment?1. Lowers your monthly payments2. Shows the lender you have vested interest3. Increases your equity in the vehicle
  21. 21. What is a Credit Report? A record of your credit activities. It lists credit-card accounts or loans you may have, past and present. It shows the balances and how regularly you make your payments.It also shows if any action has been taken against you because of bills you didn’t pay.
  22. 22. What is a Credit Score? A number that measures how likely you are to repay debt on time. Its calculated and based on your history of repaying debt.
  23. 23. Where do Credit Reportsand Credit Scores come from?
  24. 24. Who can see my Credit Report? (1) Creditors (2) Employers and Potential Employers (3) Insurance Agencies (4) Government Agencies (5) Judges (6) Landlords (7) Yourself (if you’re at least 18) Go to AnnualCreditReport.com (8) Anyone you specify in writing
  25. 25. Credit Activity Break The Loan Process
  26. 26. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit ScoreInterest RatePaymentTermInterest PaidTotal PaidDifference
  27. 27. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832Interest RatePaymentTermInterest PaidTotal PaidDifference
  28. 28. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691Interest RatePaymentTermInterest PaidTotal PaidDifference
  29. 29. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest RatePaymentTermInterest PaidTotal PaidDifference
  30. 30. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43%PaymentTermInterest PaidTotal PaidDifference
  31. 31. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19%PaymentTermInterest PaidTotal PaidDifference
  32. 32. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%PaymentTermInterest PaidTotal PaidDifference
  33. 33. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355TermInterest PaidTotal PaidDifference
  34. 34. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380TermInterest PaidTotal PaidDifference
  35. 35. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380 $495TermInterest PaidTotal PaidDifference
  36. 36. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380 $495Term 60 months 60 months 60 monthsInterest PaidTotal PaidDifference
  37. 37. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380 $495Term 60 months 60 months 60 monthsInterest Paid $1,300Total PaidDifference
  38. 38. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380 $495Term 60 months 60 months 60 monthsInterest Paid $1,300 $2,800Total PaidDifference
  39. 39. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380 $495Term 60 months 60 months 60 monthsInterest Paid $1,300 $2,800 $9,700Total PaidDifference
  40. 40. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380 $495Term 60 months 60 months 60 monthsInterest Paid $1,300 $2,800 $9,700Total Paid $21,300Difference
  41. 41. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380 $495Term 60 months 60 months 60 monthsInterest Paid $1,300 $2,800 $9,700Total Paid $21,300 $22,800Difference
  42. 42. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380 $495Term 60 months 60 months 60 monthsInterest Paid $1,300 $2,800 $9,700Total Paid $21,300 $22,800Difference +$1,500
  43. 43. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380 $495Term 60 months 60 months 60 monthsInterest Paid $1,300 $2,800 $9,700Total Paid $21,300 $22,800 $29,700Difference +$1,500
  44. 44. How Much Does Bad Credit Behavior Cost?Borrower Terry R. Fernando G. Violeta B.Principal $20,000 $20,000 $20,000Credit Score 832 691 577Interest Rate 2.43% 5.19% 16.73%Payment $355 $380 $495Term 60 months 60 months 60 monthsInterest Paid $1,300 $2,800 $9,700Total Paid $21,300 $22,800 $29,700Difference +$1,500 +$8,400
  45. 45. What is a Default?Failure to pay back the debt according to the terms to which you agreed.
  46. 46. What is Repossession? When the lender takes the collateral that was used to secure the loan. This happens when you default.
  47. 47. Let’s talk aboutproperty loans.
  48. 48. What is a Mortgage? When you borrow money to buy property or a house.
  49. 49. What is Foreclosure? When the lender takes possession of a mortgagedproperty as a result of you not paying your mortgage.
  50. 50. Let’s talk about credit cards.
  51. 51. What is a Credit Card?A card issued by a company giving you the option to borrow funds, usually at the point of sale. Credit cards charge interest and are best used for short-term financing. Interest rates for credit cards are usually higher than interest rates for other loans.
  52. 52. A debit card is NOT acredit card and will nothelp you increase your credit score – But can decrease it.
  53. 53. What is a Credit Limit?The maximum amount someone will lend to you.
  54. 54. What is an Annual Fee? An amount that some credit card companies charge each year for the use of a credit card.
  55. 55. What is a Finance Charge?Just like the interest on a loan, a finance charge is the actual dollar cost of carrying a balance on your credit card.
  56. 56. What is a Universal Default? A clause included in many credit card companyagreements that allows them to increase your interest rate if you make just one late payment. They can do this without notice.
  57. 57. What is Bankruptcy?A legal process to restructure your debt when you can no longer make all of your required payments.
  58. 58. It severely damages your credit score. It ruins your credithistory for 7-10 years.
  59. 59. By following the 4 steps to Financial Planning, you will be in the best position to avoid bankruptcy.But all of us can get off track – especially if hit by Divorce, Death, Disability, and Dismissal from Job.
  60. 60. So, if you start to struggle, go see a Financial Counselor. (We have 4 available at TxPFCU.) If you don’t do that, contact all your creditors and try to work something out with them. DON’T just stop paying and DON’T stop talking to your creditors! After all, YOU borrowed the money. The lender gave it to you in good faith. Don’t break your promise. Work something out!
  61. 61. If you have any questions about financial planning, credit, investments, or anything else, please ask! Shelley Carlson/ Director of Marketing – SCarlson@TexasPartnersFCU.org Ken Chambers/ Lending Manager – KChambers@TexasPartnersFCU.orgSidney Henderson/ Marketing Assistant – SHenderson@TexasPartnersFCU.org Stephanie Garrett/ Accountant – SGarrett@TexasPartnersFCU.org Brittany Bringman/ Bookkeeper - BBringman@TexasPartnersFCU.org You can also get a hold of us on our Facebook page – www.Facebook.com/TexasPartners Thanks again, everyone… We’ll see you at the next workshop! Your friends @ Texas Partners FCU

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