2. Objectives
3. Objectives
4. Planned Borrowing
DID YOU KNOW! 5. Planned Borrowing
6. Planning Your Credit Usage
THE TASK OF DETERMINING: 7.
Establishing a Debt Limit 8.
Establishing a Debt Limit 9. Credit Capacity Indicators * Not including housing 6-9 Debt Payments-to-Income Ratio monthly payments * monthly after tax income 10. Credit Capacity Indicators Debt To Equity Ratio total liabilities net worth * = Should be < 1 *Excluding home value 6-10 11. Debt-Payment Limits as a Percentage of Disposable Income * Excluding home mortgage loans and convenience credit to be repaid in full when the bill arrives. No, borrower should see a credit counselor. Overextended; borrower worries about debt 21 to 25 Only the fearless or foolhardy ask for more. Fully extended; borrower hopes that no emergency arises. 16 to 20 Should not be undertaken. Possibly safe limit; borrower feels some pressure. 11 to 15 Could be undertaken cautiously. Safe limit; borrower feels little debt pressure. 10 or less Take on Additional Debt? For Current Debt* Percent 12.
Setting Debt Limits for Dual-Earner Households BEWARE! 13.
The Language of Consumer Loans 14. Monthly Installment Payments (Principal and Interest) Monthly Installment Payment (Principal and Interest) Required to Repay $1,000* *To illustrate, assume you want to know how much the monthly payment would be to finance a $9,000 loan at 10% for 3 years.To repay $1,000, the figure is $32.27, multiply by 9 (for $9,000) to determine that $290.43 is required for 36 months of payments.When using amounts greater or less than $1,000, convert using decimals.For example, a loan of $950 at 10 percent for 3 years would be calculated as follows:$32.27 x 0.95 = $30.66. 26.49 25.39 24.32 23.27 22.24 21.25 20.28 19.33 18.42 5 years (60 months) 30.43 29.37 28.34 27.33 26.33 25.36 24.41 23.49 22.58 4 years (48 months) 37.16 36.15 35.16 34.18 33.21 32.27 31.34 30.42 29.52 3 years (36 months) 50.90 49.92 48.96 48.01 47.07 46.14 45.23 44.32 43.42 2 years (24 months) 92.63 91.68 90.73 89.79 88.85 87.92 86.99 86.07 85.15 1 year (12 months) 20% 18% 16% 14% 12% 10% 8% 6% 4% Terms ofInstallment 15. Sources of Consumer Credit
16. Truth In Lending Rights
17. Calculating Finance Charges and APR
APR CALCULATIONS FOR SINGLE-PAYMENT LOANS: 18.
Calculating Finance Charges and APR APR CALCULATIONS FOR INSTALLMENT LOANS: 19. Formula 7.3 20. Dealing With Over-indebtedness TEN SIGNS OF OVER-INDEBTNESS:
21. Dealing With Over-indebtedness
22. Fair Debt Collection Practices Act
Collection agencies... 23. Impact of Divorce on Credit
24. Alternative Lenders
25. Manage Over-indebtedness 1.Determine what is owed. 2.Focus budget on debt reduction. 3.Contact creditors. 4.Take on no new credit. 5.Refinance. 6.Find good help. 7.Avoid bad help. 26. Manage Student Loan Debt 1.Choose most advantageous repayment pattern allowed. 2.Consolidate student loans. 3.Pay electronically. 4.Be punctual with repayments. 5.Refinance with second mortgage loan.
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