fasfaa graduate & professional initiatives committee · 2011. 2. 7. · debt benefits from...

FASFAA Graduate & Professional Initiatives Committee

Sometimes money can be a means to a beginning


Give Yourself Credit

Using credit to your advantage


Could this be you?

•Your computer just broke down•You want to go to graduate school•You need a new car•You want to live in an apartment off campus


Knowing what’s what about credit.

•Different kinds of credit•Costs of credit•Building credit history•Developing a credit strategy•Managing credit wisely


Credit puts power in the right hands. Yours.

•Make time-sensitive purchases•Buy big ticket items•Pay for major expenses•Make certain purchases and agreements possible•Meet emergency expenses


So what is credit, really?

A person or company lends you money and trusts you will repay.•Credit: amount you’re approved to use•Debt: amount you owe•Creditor: person or company to whom dept is owed.

You repay principal plus interest over time


Secured vs. unsecured credit.

Secured Credit Unsecured CreditLeverages collateral for the No collateralpurpose of:•Obtaining higher loan/line amounts•Establishing credit history


Credit comes in several flavors.

Loans (Closed End) Lines (Revolving)- Entire amount provided upfront - Use credit as needed- Fixed monthly payments - Payments based on use- Set time to repay - Time to repay flexible- Fixed and variable interest - Usually variable interest

Examples: Example:Car loans, mortgages Credit cards


Determining the cost of a loan.

ANNUAL INTEREST

+

FEES AND CHARGES

= ANNUAL PERCENTAGE OF RATE (APR)


Determining the cost of a line.

Total cost depends on- Type of line- Amount used- When you pay

Cost includes- APR: interest on what you owe- Annual fees- Finance charges- Late charges- Cash advance fees


More breathing room.

Works for bills, too.


Credit is like a muscle.You can build it up.

•Start with what you can handle.

•Develop what you’ve attained.

•Once in good shape, you can take on more.


Where to find the best credit manager:In the mirror.

You are responsible for the quality of your credit.

•Pay on time, avoid late fees•Pay more than the minimum due, if possible•Use cash advances only for emergencies•Borrow only what you can afford


Good credit pays off.

•Helps you get credit in the future

•May qualify you for lower rates

•Frees up money for other things

•Gives you peace of mind


Credit reports paint your financial picture.

Credit reporting agencies track credit use and payment history.•Compile reports and scores•Sell to lenders, landlords and others

Lenders use credit reports and credit scores to help determine:•Whether to extend credit•Amount or limit•Rates


Develop a credit strategy.

•Decide when to borrow

•Review your budget

•Determine right type of credit

•Continually monitor your overall credit position


When does borrowing make sense?

When you…

•Know you can pay it back

•Need to buy before money is available

•Can get a better price by buying now

•Want to stretch payments over time


Lift only what you can carry.

Good advice for credit, too.


How much credit should you have?Let your budget decide.

•How much do you need?

•Do payments fit into your budget?

•How much can you afford to borrow?

•Is the term right for you?


Okay, what kind of credit is right for you?

Fixed loan or revolving line?

Secured or unsecured?


Stay on top of your credit.

Review credit reports at least once a yearwww.annualcreditreport.com1-877-322-8228

Keep track of all outstanding credit balances

Look for opportunities to reduce the amount of interestyou’re paying

http://www.annualcreditreport.com/


Paying with a loan.

Here’s an example: Kim needs $5,000 for new appliances.

•She can afford to pay $200 per month

•Applies for: $5,000 personal unsecured loan

•Monthly payment: $166.07

•Time to repay: 3 years @ 12% APR (for example)


Paying with a line.

Kim has an emergency. She needs $5,000 to fix a leaky roof.

•Charges $5,000 to her credit card.

•Minimum monthly payment: $100*

•Time to repay: 7 years and 9 months (only paying the minimum)

*Based on an 18% fixed APR


Consider ways to manage debt.

-Lower the cost of credit - Make accelerated payment

-Simplify debt repayment - Consolidate debt and pay one bill

-Reduce monthly payments - Get consolidated loan that fits budget


Benefits of accelerating loan payments.

Product: 30 year mortgageBalance: $200,000

Paying the minimum•Monthly payment: $1, 199*•Time: 30 years•Interest paid: $231,676*

*Based on a 6% APR

One Extra payment per yearAdditional payment: $1,199Time: 24 years, 9 monthsInterest paid: $184,395*

Savings in interest: $47,281Savings in time: 5 years, 3 months


Benefits of accelerating line payments.

Credit card balance: $8,000Assumption: No additional balance

Paying the minimum•Payment: $125 per month*•Time: 14 years•Interest Paid: $13,074**Based on a 17% APR

Paying $75 over the minimum•Payment: $200 per month•Time: 5 years•Interest Paid: $3,890*

Savings in interest: $9,184Savings in time: 9 years


Debt benefits from togetherness: Consolidate

Current Debt Balance Minimum Monthly Payment

Credit Card $8,500 $255

Store installment plan $7,000 $358

Personal loan $3,000 $ 90

Total $18,500 $703

New unsecured consolidation loan*

$18,500 $412

*Assumes 12% fixed rate paid over 5 years YOU SAVE $291

PER MONTH


Constantly strengthen your credit situation.

•Apply only for what you can manage

•Build credit with appropriate products

•Always pay on time

•Limit use of credit if debt increases

•Seek help if you’re struggling with debt


Credit can be your friend. Really.

The benefits of credit•Offers convenience•Lets you do more with what you have

The importance of a credit plan•Reduces worries•Keeps debt manageable•Makes credit work for you, not against you


Knowledge is good.

When put to work, even better.


Now is the Time to Act

Get on track to obtain credit

Meet with someone to discuss how credit can work for you

Schedule an appointment today

fasfaa graduate & professional initiatives committee · 2011. 2. 7. · debt benefits from...

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