Transcript Personal Finance

The following slides were part of our
study on personal finance.
• I am sorry they do not include the stories that support
the material.
• I have color coordinated the slides to help you on your
projects. I kept the colors pale so you can print them.
• Red is intro
• Green is investment also look at stock market sight
www.howthemarketworks
• Blue is banking
• Yellow is housing/renting/insurance
• Purple is credit
• Orange is student loans
The subjective final includes information from these slides or notes from class. You
have the handout with the rubric. If not there is a link to it on the website.
You can come in and copy the exact slides that we used in class, but if you are running
out of time this is another resource.
Many of these slides were not covered in class. Ignore any of the date ones.
In the intro you will find information on rent to own and zero interest type loans that
we covered with a section on loans. The loan info is in this section and in the banking
section.
There are no slides for the budget section. You were to write down what steps you
took to do the budget and reflect on the experience of budgeting.
REMEMBER IT IS DUE ON WED. 27TH. LATE FOR ANY REASON IS -25. IF ABSENT GET IT
HERE.
Personal Finance
Things we will cover to help you
become self supporting adults!
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Interest
Avoiding and eliminating credit card debt
Rights and responsibilities of renting or buying a home
Transitioning from renting to buying
Starting a small business
Investments: stock and other options
Planning for retirement
Bankruptcy, types of bank accounts available to consumers and benefits of
maintaining a bank account
Balancing checkbook
Types of loans
Being a low-risk borrower
Insurance
Charitable giving
How rent to own is very costly
• Look up on your phone the cost for a
washer/dryer top load.
• Now take your calculator and multiply from
these flyers
• Which costs more? Is it much difference?
• But how can you get things you need?
Results of price search
• Washer 1200.00
• 699.00
• 531.
• Fridge 2,000
• 500.00
dryer: 800.00
500.00
65” 2000.00
950.00
options
• Washer/dryer- use a laundry mat- this is also
expensive
• Buy a used one at garage sale- it wont be pretty
and might not be fancy but if you pay 100.00 for
one and you were spending 15.00 a week in
laundry how long would it pay for itself?
• Once you have saved enough to pay for it, you
can start saving to buy a nicer one- still not newjust better. Keep upgrading but with cash.
What about zero interest
• Things like furniture row, home depot etc.
• You can take advantage of these IF YOU ARE CAREFUL
• They will set your payments for a much longer period--you generally only have 6 months or a year to pay it off
for the zero.
• So you have to pay more every month and have it paid
off before the special ends--• If you don’t they will go back and charge you interest on
the entire balance for the entire time.
• Do not wait until the last few days--- they will act as if
they can’t post it before you are late
AVOID! AVOID! RUN! RUN! AVOID!
DO NOT
• Pay day loans
• Refund anticipation loans
• Rent-to-own
• Pawn shops
• Car title loans
• Debt consolidation with most firms
ALL OF THESE CHARGE EXCESSIVE INTEREST
Investments
• Investment is important to the economy
because it causes growth and important to the
individual because it allows individuals to
accumulate wealth.
How can you be a wise investor in
stocks and other personal investments
options
• First Identify and distinguish ways an
investment can grow over time:
– Interest income
– Dividend income
– Rising market price
• Identify risks to money invested
– Risk of decline in value
– Risk of lost purchasing power if it doesn’t keep up
with inflation then you are losing purchasing
power
– Risk of liquidity- savings placed in an inaccessible
or liquid form of investment (you might not be
able to get your investment converted to cash
quickly
• Identify factors that will help determine an
investor’s tolerance for risk, including
– Overall net worth
– Age (if far from retirement then you can take
greater risk)
– Family responsibilities
– Earnings power
You want to have a diversified portfolio– not all your
money in one kind of savings
Some Ways to invest
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Stock market
Savings
Money market
Mutual funds
Bonds
401K
IRA
Land
Capital
Also see the banking for info
Banking
http://www.youtube.com/watch?v=MTxu_IZ9Yk4
Fees banks are charging
http://www.youtube.com/watch?v=rfHyQ-8eLC4
Banks vs credit union
What is the purpose of function of a
bank or financial institutions
• Act as intermediaries between savers and
borrowers
• Offer a convenient and safe way for people to
store money and with depositors’ funds, they
provide commercial loans, personal loans,
mortgages, and issue credit cards
• Enable households and businesses to earn a
return on their savings and provide funds for
capital investments
• Provide loans so families and businesses can buy
what they need.
• You can forget to post an expense (check or
debit or ATM withdrawal)
• If you wrote a check and the numbers are misread they can take more money out than you
thought
• A deposit you made was returned and then
taken out of your account. (a payroll check
bounces and you pay your bills but there is no
money in your account)
Date #
To
Debit
+
Credit
-
Balance
11/1
Opening 1000.00
bal
1000.00
11/4
debit
Wal Mart
150.00
850.00
11/4
101
Home apt
700.00
150.00
11/5
ATM
Cash
50.00
100.00
Reconciling- get an online app!!!
Not all your checks, ATM’s, debits etc. will clear the bank before the
end of the month
Or even every day.
You have to reconcile the account once a month--- many go online
and check it daily
At the end of the month the bank closes the account for that month
and says “this is how much you had”
This is not likely to match what you had on your statement. This is
because the bank has not seen all the checks or ATM or debit card
transactions. It may not have a deposit recorded. It may also be
because you have forgotten to write down a transaction, or you miss
added/subtracted
You have to remember to add interest and take out any fees.
So what do I do first?
1st- go through the statement and look
at every transaction compared to what
you have recorded. Did you write in
one for a different amount? Forget
one? Put a check mark beside each
one that clears in your register.
.
2nd- take the balance they provide and
subtract any transactions that have not
cleared and add any deposits that have not
been posted. That should balance.
If it still doesn’t balance you have
something recorded wrong. Look very
carefully!
Why do I need to do that?
Because every transaction does not
record immediately and trusting the
ATM can get you in trouble.
You need to record each transaction
you need to verify them with the bank
statement
Why is savings important
• The more money in savings provides more
money for loans to businesses. The
businesses borrow to buy capital (man made
goods)
• More money in savings reduces the amount of
money individuals have to use for
consumption (purchasing goods and services)
How to begin a savings program
• Start off with a goal
– I recommend you have $1000.00 in emergency
cash
– Then have 3-6 months of your monthly expenses
in a form that is safe and easy to access
– Then begin to save for retirement
– Save for long term goals
• Home
• Your wants
Role of interest
• Banks pay savers interest for putting money
into various kinds of savings accounts. The
higher the interest paid the more likely people
are to save.
• The lower the interest rates are the less
money people will save, reducing the amount
of money available for loans.
Types of accounts
• Checking- has fees keeps you from carrying lots of
cash
• Savings- your money less accessible, earns interest
• Certificates of deposits (CD) ties up money for a
specific amount of time, penalty for early withdrawal,
earns higher interest
• Money market funds- lower interest than CD but
higher than savings. No time frame
• IRA- Individual retirement account, rules and
penalties for early withdrawal has tax benefits
• Mutual funds (not insured) fees, can lose money,
safer than stocks, experts chose the companies
Functions of financial institutions
• Are intermediaries between savers and borrowers
• Provide a safe and convenient way for people to
store money
• Provide commercial loans, personal loans and
mortgages and issue credit cards
• Pay interest on savings (savings provide money to
loan to businesses)
The money people save is used to
provide loans for both individuals
and businesses to purchase goods
and services
• People generally want to earn a high interest rate on
their savings, if the interest goes low then people may
not save.
Types of accounts
• Checking
• Savings
• Certificates of deposits
• Money market funds
• IRA accounts
• Mutual funds
• Checking accounts--- often charge $5.00-15.00 per month
• Savings do not usually charge you a fee to save your money.
• Certificates of Deposit are a time savings account– you commit
your money to that account for 6 months, 1 yr, 2 yrs, 10 yrs. The
longer you commit the higher the rates. You are not able to take
the money out during that time without penalties.
• Money Market funds are a type of savings account that you can
write a few checks on. It generally has a higher min. balance and
pays higher interest
• IRA accounts- Individual Retirement Accounts are accounts you
open to put money into for your retirement. There is a limit on
the amount of money you can deposit per yr and it varies based
on your age. You cannot take the money out without penalties.
• Mutual funds is like a group of people pulling their money
together to invest in stocks. It is managed by a broker firm. You
do not select the individual stocks. You are able to select % and
types. There are fees, and you can lose your money but it is safer
than buying your own stocks because professionals manage.
Having a checking account is a
responsibility
• You are guaranteeing that the piece of paper
or your debit card swipe is good for the
amount you bought.
• It is very important that you monitor your
checking account– even if you do not write
checks.
– There are ways for your account to be wrong
Buying vs. Renting
https://www.youtube.com/user/wahomeowners?feature=w
atch
Friday 4-25-14
• Do Now: What will you need in paperwork/records
to get prequalified?
• Objective: be able to explain the pros and cons of
buying a house and the impact of interest.
6 top benefits of owning a home
• 1. Tax deductions– interest and property taxes are deductible on income tax. You
may also be able to deduct the closing costs and fees for loans
• 2. Appreciation– typically the value grows at the rate of inflation plus 1-2 percent.
Sometimes you buy in the right market and the value goes up
significantly so that it really is an investment.
• 3. Equity– this is the part you actually own (not still mortgaged) You are
increasing your equity with every payment. You are not building
equity if you rent. (say you rent for 10 years at 800.00 per
month- $9,600 per year at ten years you will have spent
$96,000 and own nothing.
6 benefits cont.
4. Borrowing poweryou can use your equity to borrow money for other
things. ( I would never recommend you borrow against your
home)
5. Stabilityif you own then you do not have to worry about your rent
going up, or your apartment being sold out from under you
6.Freedom- you do not have to worry about what
color to paint your walls (homeowner associations
will dictate the outside) downstairs neighbors, etc
Other benefits
even though you are paying interest
the average value of home goes up
so you are forced to save and that
earnings is higher than sitting in a
savings account.
Rent goes up faster than the returns
you would get in the stock marketon average
When you buy your own home you
pay interest.
Take a moment to look at what
time does to the cost of owning a
home.
Amortization
http://www.bankrate.com/calculators/mortgages/a
mortizationcalculator.aspx?ec_id=m1082526&ef_id=Uh@orgAA
ATiWLBEP:20131204210439:s
http://www.youtube.com/watch?v=PNQr0QXN8G0
buy or rent
Look at your personal finances and
spending habits
Also consider if you move a great deal for
your job or because you want to. Renting
might be better- however, you could still
buy investment property and have
someone manage it as rental.
You could buy a duplex and rent out one half to help pay your payment.
You could buy some land and add onto it as you can afford--- maybe live
in an RV or trailer while you build. If you pay as you go it may take a few
years but it would be all paid for.
THINGS TO CONSIDER: YOU COULD
BUY A HOUSE WHILE YOU ARE IN
COLLEGE AND RENT OUT THE
OTHER ROOMS TO PAY THE
PAYMENTS.
YOU DO NOT HAVE TO START WITH
A MANSION- LOOK AT THE BONES
OF THE HOUSE, NEIGHBORHOOD
ETC AND BUY THE CHEAPEST HOUSE
IN A GREAT NEIGHBORHOOD THEN
FIX IT UP AND RESALE FOR A PROFIT
Disclaimer– there are always risks in buying property. The market might
fall and you are stuck with a house that you cannot sale. Ask Detroit.
Objective: Be able to
explain responsibilities
of ownership and
renting.
Monday 4/28/14
Do Now: how can you
save on interest?
WITHOUT HOMEOWNERS
ASSOCIATION OR ORDIANINCES.
HOMEOWNERS ASSOCIATION AND
CITIES, COUNTIES
You may buy and own the home, but do not be deceived there
are people who will tell you what you can and cannot do.
Look at easements, restrictions, requirements before you buy.
You might not be able to put in that circle drive or build a fence
. . . Have chickens, shoot your BB gun, . . .
Homeowner associations charge a fee to live in that
subdivision, it is paid monthly and never ends. Each is
different- what they pay for and what they restrict. Read the
material carefully. The purpose is that everyone in the
subdivision will maintain the house and your property values
will stay solid.
Complications of buying
• The cost to get into one- down payment,
closing cost
• Property tax
• Maintenance
• Can’t just pack up and move
Property Rights
• Lets look at your responsibilities and rights with a
rental, when you own your own home, and
vehicles.
• You are responsible to have insurance.
• Liability
• Entrance
• Eminent domain- (watch the short video)
INSURANCE: WHETHER YOU RENT
OR OWN YOU NEED TO HAVE
INSURANCE ON YOUR HOME/APT.
To cover your personal property in the apartment
Also liability- if someone falls on your property or gets hurt in some way
then your homeowners insurance will pay for their medical and damage.
Auto- add un-insured and underinsured insurance to your auto policy--- it will pay
for your car when the person at fault does not have insurance. Underinsured
covers for those people who do not have enough to pay for your injuries or your
expensive vehicle. Maybe they only carry $25,000 liability and your truck cost
$35,000.
Living in an apartment or other rental
YOU STILL NEED TO BUY INSURANCE!
• When you live in an apartment or other rental your
belongings are not covered by insurance in the
event of a fire, burglary, flood etc.
• The owners have insurance that cover the building
but not your personal belongings.
• BUY RENTAL INSURANCE, this can be added to your
auto insurance and is very cheap: less than 20.00 a
month.
If you rent or own you are paying
taxes- it is a responsibility
• Homeowners pay property taxes either every
month in their mortgage payment or once a year in
October.
• These taxes include: city, county, hospital, school
and there can be others.
• If you rent the owners of the property figure the
cost of taxes into your payment. In essence your
monthly payment is paying a portion of tax debt.
Renting
• You have a lease, that lease is in the names of the
person(s) that signed and were approved
• Anyone else that starts living there is not responsible
for paying the rent.
• The management and their authorized people have the
right to enter into your apartment anytime they need
to.
to spray for bugs
to check on plumbing, heating, a/c, painting
While in the apartment they are looking for evidence of
illegal activities, pets, damage, too many people living
there, anything that seems odd.
To rent
• For many even most places that you rent you will
need to fill out a credit application– they will check
your credit history.
• You will need a deposit- sometimes as much as first
and last month.
• You will have to pay for any pets that you have
• The government has restrictions on how many
people can live in a specific size
apartment/bedrooms.
What does renting costs
• If you are paying 900.00 a month for 10 years how
much have you paid?
• Do you own any part of that place?
• If you want to have something to show for your
money then you invest in property.
Eminent Domain:
Watch this short video and be prepared to discuss the following points:
What is eminent domain?
What are the 2 conditions must be met for the government
to exercise ED?
Under the traditional interpretation, what types of projects
were considered proper uses?
How and why did the concept of eminent domain begin to
change in the 50’s
Why are some local governments and politicians in favor of
using ED for economic development?
What has been the most important and controversial
eminent domain case in US history? Who won? What was
the case about?
What has been the impact of the 2005 Supreme Court
decision concerning ED?
Under the current interpretation, what is to
prevent any developer from using ED to avoid
paying fair market price for someone else’s
property?
Did the founders intend for ED to be used to
benefit private interests? Why or Why not?
Who should make decisions about how
property is used: the people who own the
property or the government? Explain.
Credit cards Friday 4/30/14
• Do Now: Explain what the current interpretation of
ED is and how they defend that.
• Objective be able to explain the difference between
a charge card and a credit card and how they
determine your balance for interest.
• http://debtwave.com/
• Click on calculator to put in figures
Charge cards vs credit cards
• Originally it was charge cards--- gas cards to be
precise. These allowed people to charge their
months gas on a card while traveling. You had
to pay them off at the end of each month.
Hence charge not credit.
• Today gas cards and American Express are still
like that. Some other accounts like florist,
expect payment in full
Credit cards actually extend you credit
• You are allowed to pay only a portion of the
balance each month.
• http://www.youtube.com/watch?v=OWwOJlO
I1nU
• This is extremely dangerous
Triggers that can raise your
interest
• If you are late even one time they can
raise the interest
• Go over your limit and they can raise
the interest
• Be late on other items so that they feel
your credit worthiness is bad they will
raise the interest
Credit cards are very risky--- it is like
inviting a cobra snake to live in your
home.
• If you chose to get one proceed with caution.
• Fees– banks can charge you not only interest
on CC’s but also fees– annual fees, late
charges, over the limit charges
• Texas laws set limits on the interest the bank
can charge- but that is only if the bank’s
headquarters are in Texas. If your CC is from
a bank out of state then they can charge
much higher interest.--- guess where most
credit cards are at?
Fees
• They can also raise the fees– be late and pay 35 to
75.00 late fee
• Go over your limit and they will charge you a fee.
What is all that fine print
• Credit cards charge you a finance charge– you
will see it as something like 1% or 12.58%apr
or higher.
• It often has rules, if you are late on a payment
then they charge you a late fee and can up
your interest rate.
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Your interest rate is also known as your annual percentage rate (APR), which for most people falls between 12.99% and 29.99%. That percentage, known as a nominal
rate, usually works out to a figure that's a bit higher (an "effective interest rate") once the interest is factored into your balance. The majority of credit card
companies use an average daily balance method to calculate interest charges, which means that your interest is compounded based on your daily balance.
Tool: APR Calculator
The first step is to determine the average daily balance. For example, let's say that in a 30-day period you have a $1,000 balance carried over from the previous
month. You don't use your credit card at all during this month, but on the 11th day, you make a payment of $300. So, the balance for days 1-10 is $1,000, and the
balance for days 11-30 is $700. Add up the total daily balance for the month, and then divide that number by the number of days in the period to get your average
daily balance.
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(10 x 1,000) + (20 x 700) = 24,000
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24,000 / 30 = 800
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0.14 / 365 = 0.00038
The second step is to calculate your periodic interest rate. If your APR is 14%, divide that by 365:
Your periodic (or daily) interest rate comes out to 0.038%. Next, multiply your periodic interest rate by your average daily balance, then multiply that number by the
number of days in the period:
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800 x 0.00038 = 0.304
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0.304 x 30 = 9.12
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Now that you understand how interest charge is calculated, there are two things to keep in mind. First of all, your interest is charged from the date of purchase, not
from the beginning of the next month. There is no grace period unless you pay off your balance in full at the end of the period, in which case the interest charges are
waived. Second, the CARD Act of 2009 stipulated that credit card statements include a section that clearly outlines how long it will take you to pay off your card if you
only pay the minimum balance. If you make a habit of only paying the minimum each month, it would benefit you to pay attention to that section and make plans to
pay off your balance within a reasonable amount of time.
Thus, your interest charge for that month is $9.12.
See if you can do this problem- follow the
steps.
• Figure out what your interest will be- You have
a balance of 5000.00 on the 1st, you pay 1000.00 on
10th. Your APR is 20%
• #of days at 5000.00 (multiply) + # of days at lower
bal.
Take that number and divide by number of days in
month (31)
Divide 20% by 365 days then multiply your daily rate by
your daily avg. That gives you your daily interest rate.
Multiply that by number of days in month (31)
THINGS YOU CAN DO
• If you are late for some reason, but always pay on
time--- call and ask them to remove the fee---- but
often they will still up your interest rate
• Ask to change your due date if your paydays change
or other circumstances change
How to protect yourself
• Read the fine print
• Check your statements every month
• Pay on time- early
• Pay more than the minimum due
• Protect your numbers- know where your cards are
• Do not let it out of your sight--- wait staff has been
known to duplicate your card info and then make
themselves cards
• Look at receipts- people sometimes add a little and
you do not realize it
• Draw lines through empty fields on a receipt (tips)
• Only give out your number over the phone if you made
the call—
• Never give out the number to unsolicited mail– we
need you to verify your cc number--- no they do not
they are scamming you
• Make sure the website says https:// rather than http://
the “s” means secured line
• ATM loses are your responsibility if you do not report at
the end of the month when statement comes in
• MAKE A LIST OF ALL CARDS, NUMBERS, PHONE
NUMBERS AND PUT IT IN A SAFE SPOT--- SAFTY
DEPOSIT BOX. IT IS A GOOD IDEA TO MAKE A PHOTO
COPY OF ALL OF THEM AND KEEP IT AWAY FROM YOUR
HOME– IF YOUR HOUSE IS LOST IN FIRE OR YOUR
CARDS STOLEN YOU NEED THE NUMBERS TO CONTACT
THEM.
• That being said, it is very dangerous to have all the
information written down. If someone has the
number, name on card, expiration date and the
code on the back they can use your card.
• Companies are not suppose to print out your entire
card number– last 4 digits only. If someone hands
you a receipt that has all the numbers they can be
fined up to $500.00
Theft• You must report theft right away. Most only hold
you responsible for $50.00 per card
• If you have disputes over the credit card billing it
must be in writing
• You only have 2 days after you receive the
statement to report ATM losses--- if you wait longer
you are liable up to $500.00. if you wait over 60
days you can be liable for the full amount.
DON’T GO CREDIT CARD CRAZY
• EVERY TIME YOU APPLY FOR ONE YOU LOWER
YOUR SCORE. YOU GET LABELED “CREDIT
SEEKER”
• SPACE OUT YOUR APPLICATIONS
• Objective: Today know what the 3
C’s are, 3 agencies and how to
maintain your credit worthiness.
3 C’s of credit
• Capacity- can you repay the loan? Looking at your
wages, as well as your other financial obligations
• Character: look at your credit history, how much
you owe, how often you borrow, whether you pay
on time and consistently, how stable your life is
(how long at that residence, job….)
• Collateral- want to know what assets you have
(stocks, savings, property etc.) that could be used
to repay
What did you learn about
$10,000?
WHAT YOU PAY IF YOU ONLY MAKE MINIMUM PAYMENTS (BASED ON 18%;
$20.00 PAYMENT OR 2%)
AMOUNT
OWED
PAY-OFF
PERIOD
INTERST
COSTS
ACTUAL
COSTS
$1800
22 YEARS
$3,800
$5,600
$3900
35 YEARS
$10,100
$14,000
To have or not to have that is the
question
Advantages
disadvantages
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• Costly if you carry a balance
• commits future earnings
• Discourages comparison
shopping
• Encourages impulsive and
over spending
• Items wear out before paid
for
• Perks provide incentive to
overspend.
Buy not pay later
Widely accepted
Carry less cash
Rewards programs
No need to show ID or give
personal info
• Monthly statement records
expenses
• Can be an interest free loan
if paid in full each month
I personally would recommend
you
• If you are going to get a card get one from your
bank and have it at only $500 or $1000.00
• Pay it off every month
• Use it for the advantages but do not pay them any
interest
• You will find it helpful to rent hotel rooms, cars, buy
airline tickets, and to use traveling for safety
• You will hate yourself if you get into debt on credit
cards- it is a hole that is nearly impossible to climb
out of without extreme measures
How to make yourself more credit
worthy
• Pay
bills on time
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Keep credit card balances low
Keep unused accounts open
Only apply for credit when needed
Shop around for best rates
Correct inaccuracies on credit report
Avoid excess credit inquires
Avoid bankruptcy
Avoid consolidating balances
Negotiate with creditors
• Buy only what you can afford
• Pay more than the min. Do the math, play smarter
Friday 5/2
• What are the 3 C’s?
• How long to pay off 1800 @20% with min?
• Objective Credit worthiness and credit scores
Credit agencies
• There are 3 credit reporting agencies that
people/businesses etc pull from to get data on your
credit worthiness.
• Understand that not every business reports to an
agency, not all report every month and not all
report to all 3.
• You might have good credit at a place but they never
report so it seems you have none
• You might have all your credit at one place so you do not
get the benefit of having it reported to all 3--- no credit
on one or more is counted as negative--- they average.
So what can you do?
• Ask which firm(s) they report to
• How often do they report
• Seek credit from ones that report to all 3 or to ones
you are not being reported on from your others
• Example--- local credit union does not report to
eastern firms, it takes a business that has their
headquarters in the east to get it reported to them.
3 credit agencies
• Experian
• P.O. Box 2104
• Allen, TX 75013-2104
• 1-888-397-3742
• www.Experian.com
• Equifax
• P.O. Box 740241
• Atlanta, GA 30374-0241
• 1-800-685-1111 (order report)
• 1-800-525-6285 (report fraud)
• www.Equifax.com
• Trans Union
• P.O. Box 2000
• Chester, PA 190222-2000
• 1-800-888-4213 (request report)
• 1-800-680-7289 (report fraud)
• www.transunion.com
Review your credit report on a
regular basis
• Order a free credit report from each of the above at
• www.annualcreditreport.com
TWO MAJOR REPORTS (BUT THERE ARE DIFFERENT
ONES EVEN IN THESE (GENERIC, BANKCARD, PERSONAL
FINANCE, MORTGAGE, INSTALLMENT LOANS AND
AUTO)
• VANTAGE (501-990) the 3 credit reporting
agencies wanted to win business from the FICO
scores you can get Vantage Score from Experian
and Transunion websites
• FICO (300-850)
• LENDERS LOOK AT YOUR FICO (Fair Isaac
Company’s) myfico.com
JUST UNDERSTAND THAT THERE ARE
OTHERS AND THAT YOU DO NOT HAVE
ACCESS TO ALL
• THINGS LIKE CREDIT KARMA ARE GIVEN TO
YOU BUT NOT USED BY LENDERS
YOUR BENEFITS DO NOT INCREASE
FROM 740 TO 800
•
•
•
•
FAIR OR STANDARD SCORE 620-659
PREFERRED 660-699
PRIME 700-739
ELITE 740 AND UP
• THESE ARE GUIDELINES---
YOUR BENEFITS DO NOT INCREASE
FROM 740 TO 800
•
•
•
•
FAIR OR STANDARD SCORE 620-659
PREFERRED 660-699
PRIME 700-739
ELITE 740 AND UP
• THESE ARE GUIDELINES---
DON’T CLOSE CREDIT ACCOUNTS
• MAINTAIN OLD ACCOUNTS- ZERO BALANCE IS
GREAT
• THEY LOOK AT WHAT % YOU HAVE CHARGED
SO IF YOU HAVE MORE AVAILABLE CREDIT
THAN USED IT MAKES YOUR % BETTER
• THEY LOOK AT HOW OLD YOUR ACCOUNTS
ARE--- THE PEOPLE WITH 825-850 HAVE
ACCOUNTS THAT ARE 25 YRS OLD
• HAVE LESS THAN 10% DEBT FOR YOUR CREDIT
AVAILABLE
• USE YOUR CARD EVERY ONCE IN A WHILE –
YOU DON’T HAVE TO MAINTAIN A BALANCE
BUT YOU DO NEED TO SHOW THAT YOU ARE
CREDIT WORTHY
• IT IS BETTER TO ASK TO HAVE YOUR CREDIT
LINE EXTENDED THAN GO TO ANOTHER CARD
(REMEMBER LONGER YOU HAVE IS BETTER)
Dangers of Credit Cards
• It is really easy to swipe a card and buy
something on impulse
• You pay way more money for the items due to
interest
• You end up owing more than you can pay each
month and pay only the min. amount ;(
• If you are late the fees are horrific
CREDIT ERRORS
• ONE OF THE BIGGEST AREAS OF ERRORS IS FALSE
INFORMATION DUE TO IDENTITY THEFT/WRONG
NAME REPORTED. CHECK YOUR CREDIT
REGULARLY
• YOU CAN CHECK YOUR CREDIT FREE AT
www.annualcreditreport.com if you get one from
each company spaced out every 4 months you
can see errors (but remember not every company
reports to all 3)
•
FAIR AND ACCURATE CREDIT
TRANSACTIONS ACT
EVERY LEGAL US RESIDENT IS ENTITLED TO A
FREE COPY OF HIS OR HER CREDIT REPORT
FROM EACH CREDIT REPORTING AGENCY
EVERY 12 MONTHS.
THEY DO NOT CONTAIN YOUR CREDIT SCORE–
JUST YOUR CREDIT REPORT
Student Loans
https://studentaid.ed.gov/sa/types/loans/interest-rates
• How does interest accrue on my student loan?
• Interest accrues daily on your student loan from the day it's
disbursed until the day your loan balance reaches zero.
• We use a simple formula to calculate your daily interest accrual:
• Interest rate × current principal balance ÷ number of days in the year
= daily interest
What’s the difference between Direct Subsidized Loans and Direct Unsubsidized Loans?
Direct Subsidized Loans are available to undergraduate students with financial need.
Your school determines the amount you can borrow, and the amount may not exceed your
financial need.
The U.S. Department of Education pays the interest on a Direct
Subsidized Loan
while you’re in school at least half-time,
for the first six months after you leave school (referred to as a grace
period*), and
during a period of deferment (a postponement of loan payments).
*Note: If you receive a Direct Subsidized Loan that is first disbursed between July 1, 2012, and
July 1, 2014, you will be responsible for paying any interest that accrues during your grace
period. If you choose not to pay the interest that accrues during your grace period, the
interest will be added to your principal balance.
Direct Unsubsidized Loans:
You are responsible for paying the interest on a Direct Unsubsidized
Loan during all periods.
If you choose not to pay the interest while you are in school and
during grace periods and deferment or forbearance periods, your
interest will accrue (accumulate) and be capitalized (that is, your
interest will be added to the principal amount of your loan).
What is an Interest Notice?
•An interest notice is an account summary that details the interest accrued on
your student loan(s) during a certain period of time.
•You receive an interest notice—instead of a bill—if your loan is in deferment,
forbearance, grace, or in-school status.
•An interest notice differs from a bill because you're not required to make a
payment.
Benefits of Paying Interest
Making payments on your interest notice can minimize the amount of interest
that will capitalize (be added to your current principal balance) when
your account enters repayment. Because less or no interest will be added to
your original loan amount, your monthly payment will be less.
When Interest Accrues
Interest accrues on your unsubsidized student loan:
•Every day, from the day the loan is disbursed until you make the
last payment.
•Even if your loan is not in repayment.
Interest accrues on your subsidized student loan:
•Every day, from the day the repayment period starts until you
make the last payment.
•During your grace period if your loan was disbursed on or after
July 1, 2012 and before July 1, 2014.
Interest does not accrue on your subsidized student loan during:
•Your in-school status.
•Your grace period if your loan was disbursed before July 1, 2012.
•An approved deferment.
Loan Type
Direct Subsidized Loans
Direct Unsubsidized Loans
Borrower Type
Loans first disbursed on or after 7/1/15 and
Loans first disbursed on or after 7/1/14 and
before 7/1/16
before 7/1/15
Undergraduate
4.66%
4.29%
Undergraduate
4.66%
4.29%
Graduate or Professional
6.21%
5.84%
Direct Unsubsidized Loans
How is interest calculated?
The amount of interest that accrues (accumulates) on your loan from month to month is determined by a simple daily
interest formula. This formula consists of multiplying your loan balance by the number of days since the last payment
times the interest rate factor.
Simple daily interest formula:
Outstanding principal balance
x number of days since last payment
x interest rate factor
= interest amount
40,000.00 x30 x .00011753
interest on this month is 141.04
If it is unsubsidized then they would have
added that to the balance each month,
except each month it would be more.
-------------------------------------------------------------------------------What is the interest rate factor?
The interest rate factor is used to calculate the amount of interest that accrues on your loan. It is determined by dividing
your loan's interest rate by the number of days in the year.
Loan Type
First Disbursement Date
On or after 10/1/14 and before 10/1/15
Loan Fee
1.073%
Direct Subsidized Loans and Direct Unsubsidized
Loans
On or after 10/1/15 and before 10/1/16
1.068%
On or after 10/1/14 and before 10/1/15
4.292%
Direct PLUS Loans
On or after 10/1/15 and before 10/1/16
4.272%