Module 3: Debt LessonPart 1

Module 3: Debt LessonPart 1

The Debt Stuff No One is Talking About

The Lesson Blueprint

✓What is Debt?

✓Type of Debt

✓Credit Scores

What is Debt?

✓Debt is ANYTHING you owe to Someone Else

✓Credit Cards

✓Student Loans

✓Car Payments

✓Medical Bills

✓IRS

✓Payday Loans

✓Family Member

✓Collections

Secured Debt?

✓Utilizes a Form of Collateral

✓Your Car

✓Your Boat

✓Your RV

✓Your House

✓Your Dog?

✓Think “REPO Man”

Unsecured Debt?

✓Does NOT have Collateral

✓“Stuff” you bought on your Credit Card

✓Student Loans

✓Income Taxes

✓Telephone/Utility Bills

✓Personal Loans

✓Most Debt falls under Unsecured Debt

Fixed Rate Debt?

✓Same Interest Rate for Life of Loan

✓Your Mortgage (15 year FIXED)

✓Car Loans

✓Federally Backed Student Loans

✓Some Privately Held Student Loans

Variable Rate Debt?

✓The Interest Can Change or is Scheduled to Change

✓Adjusts as Market Rates Change

✓Credit Cards

✓Variable Rate Mortgages (ARMs)

✓Some Privately Held Student Loans

✓Usually Starts off with an “Introductory Offer” to

tease you!

Fixed vs Variable Terms

✓When the Loan is Scheduled to be Paid Off

Fixed Variable

✓The Loan Pay Off Date is

Already Determined

✓Mortgage

✓Car Loan

✓Auto Lease

✓Student Loan

✓The Payment Term is left

Open (No End Date)

✓Forever Debt

✓Credit Cards

Credit Card Debt

✓Unsecured Debt

✓ END of you Budget

✓ These can be negotiated

Credit Card Debt

“You Need a Credit Card to….

✓ Rent a Car

✓ Purchase Online

✓ Travel

This is Just Plain Wrong

Credit Card Debt

“Debit Cards Just

Aren’t Safe”

http://usa.visa.com/personal/security/zero-liability.jsp

Credit Card Points

The Credit Card Company is Smarter than You

Nothing is Ever Free

Who’s Building is Bigger?

If you Carry Credit Card Debt, Cut Up the Cards

If you Don’t Carry Credit Card Debt, Cut Up the

Cards

Medical Debt

✓Unsecured Debt

✓ END of you Budget

✓ These can be negotiated

Student Loans

✓ You HAVE to Pay These

✓ Don’t Go Away After Bankruptcy

✓ Exceptions to the Rule

✓ Brunner Test – Difficult

✓ Disability

Predatory Lenders

✓ Cash Advance

✓ Payday Lenders

✓ Title Loans

✓ Rent to Own

Predatory Lenders

✓ Predominantly Found in Lower Income Areas of Town

✓ “Average Payday Lender Charges 400% Interest”- Centers for Responsible Lending

✓ Illegal in Some States

✓ Interest Rate Caps In Some States

✓ Bottom Line: Stay Far Away

Zero Percent Interest

✓ There is no such thing

✓ Why Would a Bank want to Lend you Money for Free?

✓ They Don’t Want to and They Never Do

Car Debt

✓New Cars

✓Leased Cars

New Cars✓ New Cars lose 60% - 70% in the first 4 years!

✓ Most of it in the Very First Year

✓ Average Car Payment is $503 over 68 Months

– USA TODAY 2016

✓ Average New Car Sold in 2016 = $33,560

✓ Four Years Later….

✓ $12,000

New Cars

✓ Average Profit for Car Sold: $111

“…new cars are essentially a loss leader for dealers, who

make most of their money by fixing your car, selling you a

warranty when you buy a new car, financing car loans, and

used car sales”

-Huffington Post

Leased Cars

✓ The Most Expensive Way to Operate a Vehicle

✓ You are Covering the Depreciation of the Vehicle

✓ Example: You Lease a Brand New $30,000 Car

✓ You turn it in after 36 Months & Car is Worth Only $14,000

Leased Cars

✓ You Covered the Depreciation for the Dealer at $444/month

✓ You Provided the Profit with Down Payment and the $0.10/mile

that you went over

Leased Cars

✓ “But I get to write off my Lease”

✓ You are creating an unnecessary business expense just for the

write off

Leased Cars

✓ If you paid $444/month ($5,328/yr) for the Lease, you could

write off that amount off to save $1,332

✓ You paid the Dealership $5,333 to avoid sending $1,332 to the

Government

✓ And Your Car Dropped in Value Like a Rock

Credit Score

awesomemoneycourse.com/creditsesame

But First…

✓ Good to know Credit Score?

YES!!!

✓ Better to have ZERO Debt than High Credit Score?

YES!!!

✓ Checking you Credit Report?

(Module 4)

Rookie Mistakes

✓ You Continue to Believe the Lies about Debt

✓ Your Broke Friend Tells You What You Want to Hear

✓ You Make Yourself the Exception

Wrapping Up

✓ Debt is Everywhere

✓ Arm Yourself with Knowledge

✓ We are Changing Our Behavior

✓ You Can Live Without Debt…and Survive

In the Next Module…

✓The Steps to Paying Off Debt

✓ I Don’t Have the Money to Pay Them

✓Getting out of your Car Payment

✓Collection Bullies