dump your debt• credit card balance transfers • personal loans • debt consolidation loans •...
TRANSCRIPT
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DUMP YOUR DEBT
Migdalia Gomez Community Engagement Manager
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WHERE ARE YOU NOW?
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LIST YOUR DEBTS
And monthly payments!
Visit www.HUECU.org/HUB for this and other handouts.
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Amount APR Terms Monthly Payment
$10,000 7.5% 120 months $119$5,000 18.0% 60 months $127
CALCULATE THE COST OF YOUR DEBT
Total Interest Paid
$4,244$2,618
Total Amount
Monthly Payment
Total Interest
$15,000 $246 $6,862
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ROAD(S) TO REPAYMENT
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• Credit Card Balance Transfers • Personal Loans• Debt Consolidation Loans• Student Refinancing Loans
LOOK FOR LOWER RATES Extending the terms
• may lower payment, butincrease total loan payments.
Benefits and conditions • of the original debt, may not
apply once you refinance.
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STUDENT LOANS• Federal Consolidation
• Combines your loans into one.
• Studentaid.gov
• Private Refinancing
• Combines your loans into one.• Typically based off your credit.• May reduce your interest rate.• Lose federal benefits.
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RESEARCH TAX LAWS• Student Loan Interest Rate Deduction
• Up to $2,500
• Home Mortgage Interest Deduction
• Home Equity Loan Interest Deduction
Visit IRS.gov or consult a tax professional for details. Some deductions may not be applicable to your specific situation.
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CREDIT IMPACT: RATES AND PAYMENTS
CREDIT SCORE APR MONTHLY
PAYMENTADDITIONAL COST
IN A YEAR720-850 4.23% $741 $0690-719 5.68% $757 $192660-689 7.73% $780 $468620-659 11.29% $822 $972590-619 16.28% $882 $1,692500-589 17.71% $900 $1,908
<500 Not eligible ---- ----
If your credit improves, you may be able to refinance your debt.Source: Myfico.com – 36 month car loan - $25,000
ADDITIONAL COSTAFTER 3 YEARS
$0$576
$1,404$2,916$5,076$5,724
----
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ANNUALCREDITREPORT.COMReceive a free annual copy of report from each of 3 bureaus.
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COMPARE YOUR OPTIONS
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1.99% balance transfer for 12 months, then 10.99%
TEMPTING OFFERS
Debt consolidation loan at 7.99% for 5 years.
OR
$10,000 at 21% and you can comfortably pay $300/month.
WHAT WOULD YOU DO?
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IT DEPENDS…
1.99% for 12 monthsPayments would be $842
Total interest $108
$300 / monthWould pay balance in 38 months
Total interest $964First 12 months at 1.99% then 10.99%
$203 monthly payments for 5 years
Total interest $2,162
$300 / monthWould pay balance in 38 months
Total interest $1,343
OR OR
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REPAYMENT STRATEGIESSNOWBALL Focus on smallest debt first. Build momentum
AVALANCHE Focus on highest interest first.Start high then level off
SPRINKLE Spread extra payments asyou’d like.
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WHAT MOTIVATES
YOU?
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WHERE SHOULD A $10,000 PAYMENT GO?
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* DOWN PAYMENT OR PAY OFF DEBT?
TOTAL INTEREST AT END OF LOAN
MORTGAGE* STUDENT LOAN**
MORTGAGEINTEREST
STUDENT LOANINTEREST
TOTAL INTERESTS
$400,000 $50,000
*5% APR for 30 years; mortgage only, assuming $0 PMI; taxes and insurance not included.** 7% APR for 15 years
EXAMPLE ONLY FOR ILLUSTRATIVE PURPOSES. TOTAL INTEREST WILL VARY BASED OFF RATES AND TERMS.
$400,000 $40,000 $373,023 $24,716$390,000 $50,000 $363,698 $30,895 $394,593
$397,739$403,918$373,023 $30,895
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OUTSMART YOUR DEBT
INTEREST RATE
MONTHLY PAYMENT
INTEREST OVER LIFE OF THE LOAN
TOTAL COST OF LOAN
Current Loan
18% $254 $5,236 $15,236
Refinancing (same term)
10% $212 $2,748 $12,748
Pay more minimum
10% $254 $2,170 $12,170
$10,000 loan at 18% for 5 years
Round Up 10% $275 $1,963 $11,963
Paid off in 3.7 years and save $3,273 in interest.
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HUECU.ORG/CALCULATORS
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WHAT IF DEBT IS GREATER THAN INCOME?
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DEBT MANAGEMENT PLAN (DMP)
• Reduce interest rates on debts
• Provide financial counseling
• Cost based off state ($75 max monthly in MA)
• Debt Management Plans are not the same as Debt Settlement.
CREDITOR PAYMENT BEFORE DMP
PAYMENT ON DMP
Creditor A $132 $76Creditor B $235 $185Creditor C $80 $76
Creditor D $62 $22
Creditor E $518 $413
Creditor F $81 $68
$1,108 $840
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DMP: PROS and CONS
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75%
76%
GREENPATH FINANCIAL WELLNESS
Empowering people to lead financially healthy lives.
• Free for HUECU community• Budget counseling• Credit report review
• Immediate counseling• Confidential • Flexible Hours
Monday –Thursday 8 a.m. - 10 p.m. Friday 8 a.m. - 7 p.m.Saturday 9 a.m. - 6 p.m.
HUECU.org/GreenPath877-337-3399
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75%
76%
1. Ace Your Credit Score
2. Understand What You Owe
3. Do The Math.
4. Know Your Personality.
5. Reduce, don’t add, Debt.
NEXT STEPS