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Credit ~ Next Steps - PowerPoint Presentation

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Credit ~ Next Steps - PPT Presentation

Homework Passport page 38 Welcome Paying Down Debt Debt Snowball Predatory Lending Trap Types of Predatory Loans Payday Loans Refund Anticipation Loans Car Title Loans RenttoOwn Contracts ID: 445537

debt loans refund loan loans debt loan refund predatory credit smallest apr pay payment title payday rent car interest

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Slide1

Credit ~ Next StepsSlide2

Previous Lesson Assignment

From Financial Empowerment Passport

Check credit score, evaluate progress

Obtain second report from

www.annualcreditreport.com

Develop a debt snowball at

www.powerpay.org

Pay

all monthly bills in full and on time

Create a plan for

windfalls

Evaluate savings progress with coach

Continue budgeting so that you can have three months of living on a budget prior to the end of the challenge

Read Credit Resource Guide

www.bankonhr.org

Read Homework Notes below

Reconcile bank statement

Make contact with your coach Slide3

How’s It Going?

Have you added to savings this month?

Were you

able to

pay your expenses without

depleting

savings?

Did you overcome a financial hurdle?

Did you live on less than your income?Slide4

What Do You Know?

Pre-Test from Participant’s Guide

1. Problems with predatory loans can include: (Select all that apply)

High annual percentage rate (APR)

High fees

The need to pay off the loan in a short time period

Puts the collateral (asset used to obtain the loan) at risk

2

. Paying the minimum payment on a credit card every month will

:

pay a large percentage of the total balance owed every month 

mean that the final amount paid is much higher than the initial

cost

 allow the cardholder to avoid paying any interest charges 

mean that the charge will be paid off in a decent amount of time

 

3.

What sources for a loan tend to have lowest interest rates?

Payday lender

Cash- advance lender

Credit Union or Bank

Car Title lender Slide5

What Do You Know?

Pre-Test from Participant’s Guide

4.

Before accepting a loan you should

: (

Select all that apply).

Consider whether the item is a need or a

want

Make sure you can afford the loan

Check to make sure the loan provider is reputable

Obtain loan quotes from other lenders

then compare

all terms and

conditions

What is the most important step to paying off debt?

Refinancing

for a better interest rate

Stop creating new debt

Pay off debt before saving money

Paying off the lowest balance first

Slide6

What Do You Know?

Pre-Test from Participant’s Guide

1. Problems with predatory loans can include: (Select all that apply)

High annual percentage rate (APR)

High fees

The need to pay off the loan in a short time period

Puts the collateral (asset used to obtain the loan) at risk

2

. Paying the minimum payment on a credit card every month will

:

b) mean that the final amount paid is much higher than the initial

cost

 

3.

What sources for a loan tend to have lowest interest rates?

c) Credit Union or BankSlide7

What Do You Know?

Pre-Test from Participant’s Guide

4.

Before accepting a loan you should

: (

Select all that apply).

Consider whether the item is a need or a want

Make sure you can afford the loan

Check to make sure the loan provider is reputable

Obtain loan quotes from other lenders than compare all terms and conditions

What is the most important step to paying off debt?

b) Stop creating new debt

Slide8

Let’s Talk About You

What has been your experience with debt?

Do you know people who have gotten into trouble with debt?

How do you guard against building credit card balances?Slide9

Credit Next Steps

Making wise credit decisions

Assessing cost of credit

Finding funds when you need them

Building credit

Predatory lending traps

Debt consolidation

Getting help

Pay Down Debt

Debt Snowball

Slide10

Making Wise Credit Decisions

Is the item a want or a need?

If a needWhat will you have to give up or put off by using credit to buy this now?

Can you wait to purchase the item until you have enough money saved?

Can you find the item for less?

Buy used (vehicle, furniture, clothing)

Slide11

Assessing Cost of Credit:

Truth in LendingSlide12

Sources for funds

Relative, Friend,

Religious institution

Bank/Credit Union

Refinance with creditor

Savings

Salary Advance

Cash advance

on credit card

Social Service Agency

211 VirginiaSlide13

Building Credit

Secured credit card

Money deposited in your account becomes

the credit line for your credit card

Credit Builder account

Regular monthly deposits are treated as payments on a line of credit and reported to the credit reporting

agencies

Authorized user on credit card

Your name is added to someone else’s credit card

Cosigner on your loan

The cosigner is obligated if the loan is not paid Slide14

What is Predatory Lending?

Deceptive

Fraudulent

Preys on the vulnerable

Targets lower-income

& minorities

wreaks havoc

High costSlide15

Predatory Loans

Car Title Loans

Rent-to-Own

Contracts

Payday Loans

Tax Refund

Anticipation Loans

Cash-Advance Loan

Pawn Loan

Buy Here/Pay HereSlide16

.Slide17

.

Slide18

.Slide19

Other High Cost SourcesSlide20

Debt Consolidation Options

Single loan to pay off all creditors

Secured Loan

Auto, Home equity loans or lines of credit.

Asset is at risk

Balance transfers to a zero-percent credit card

May have balance transfer fee

Low rate only lasts if you pay on time

Personal or equity loan from credit union or bank

May have origination feesSlide21

Debt Consolidation Options

Work with a non-profit credit counseling organization

Debt repayment plan

Small fee

Borrow money from a friend or family member

Puts relationship at risk

Potentially puts other persons finances at risk

Borrow from a retirement account : “last resort”

Lowers your retirement savings

May be

penalty of10

% if less than 59½ years oldSlide22

Debt Consolidation

70 percent of Americans who take out a home equity loan or other type of loan to pay off credit

card debt

end up with the same (if not higher) debt load within two years.

Slide23

Getting Help

Credit Counselling

Choose a

non profit, accredited agency

National Foundation for Credit Counselling

www.nfcc.org

Services offered

Provides one-on-one counseling

Reviews

your financial situation

Counselor may work with creditors to reduce payments and/or lower interest rate

Lori :Mortgage-You mentioned Up Center/ Jewish Family Services

- not listed in Bank On Resource GuideSlide24

Effect of Minimum Payments

Card

Balance

Interest

Rate

Minimum Payment

Total Payment

Total Interest

Payment Time

$5,000

15%

$150

$6,508

$1,508

3 years

8 months

$5,000

25%

$150

$8,625

$3,625

4 years

10months

powerpay.orgSlide25

How To Pay Off Debt:

Stop acquiring new debt

Establish emergency

savings

Implement a debt snowball (www.powerpay.org)

List all debts from the smallest balance to largest

Pay the minimum on everything but the target debt until it is paid off

Then add the payments from the target debt to the next debt (see example)

Continue this process until you are debt

freeSlide26

Debt Snowball:

www.powerpay.org

Creditor Name

Balance

Minimum

Payment

Interest Rate

Credit Card

#1

$ 432.97

$ 25.00

23.75%

Credit Card

#2

$1,183.00

$100.00

15.27%

Vehicle Loan

$3,812.00

$361.00

7.87%

Student Loan

$4,418.18

$105.41

6.18%TOTAL$9,846.15$591.41

Example: An Individual who can pay $100 per month more than the minimum balance on the credit cards and monthly amounts on revolving credit. Slide27

Debt Snowball: Payment PlanSlide28

Powerpay Results

Without Snowball

With Snowball

Payment

$591.41

$691.41

Total Repaid

$10,779.14

$10,350.60

Total Interest

$932.99

$504.45

Time in Debt

4 years

0

months

1 year

3 months

Time Saved

2 years 9 months

$$

Saved

$428.54

Total Debt $9,84614Slide29

Credit Next Steps

Limit your debt

Your Spending Plan is key!Utilize traditional lending institutions

Avoid predatory lending sources

Debt consolidation

Establish Debt Repayment Plan

Use debt snowball

www.powerpay.orgSlide30

What Have You

Learned?

(Post-Test)Slide31

What Have You Learned?

Post-Test from Participant’s Guide

1. What should you evaluate when considering a loan? (Select all that apply).

a. Is there a less expensive alternative to this lender?

b. What happens

if my

payments are late?

c. What happens if the loan is not paid back in full?

d. What are the fees and the

APR?

 

2. What actions can you take to reduce

relying

on credit cards?

(Select all that apply)

a. Give into temptation

b. Build savings

c. Build a monthly spending plan

d

.

Evaluate your needs and wants

 

3. Which of the following will NOT contribute to a successful debt snowball plan? a. Use a spending plan with expenses less than income to avoid new debt

b. Pay the minimum on every debt except the target until it is paid off c. Not having a monthly spending plan d. Once a debt is paid off add those payments to the next target debtSlide32

What Have You Learned?

Post-Test from Participant’s Guide

4. Which of the following are true about a secured credit card? (Select all that apply).

a. Uses your savings as collateral

b. Requires a high credit score to qualify

c.

Helps you build your credit score

d. Available to almost anyone, regardless of your credit history

What is true about predatory lending? (Select all that apply)

The lender approves a loan based on your credit score

The lender reports payments to credit reporting agencies

The company is deceptive in its advertising

APRs are less than traditional lendersSlide33

What Have You Learned?

Post-Test from Participant’s Guide

1. What should you evaluate when considering a loan? (Select all that apply).

a, b, c and d are appropriate answers.

 It is important to know the costs associated with any loan. Costs can include more than just the interest paid.

2. What actions can you take to reduce reliance on credit cards?

(Select all that apply)

b. Build savings

c. Build a monthly spending plan

d

.

Evaluate your needs and wants

Giving into temptation will

not

help you reduce your reliance on credit.

 

3. Which of the following will NOT contribute to a successful debt snowball plan?

a. Use a spending plan with expenses less than income to avoid new debt

b.

Pay the minimum on every debt except the target until it is paid off

c. Not having a monthly spending plan

d. Once a debt is paid off add those payments to the next target debtTo be successful in reducing your debt, you should have a monthly spending planSlide34

What Have You Learned?

Post-Test from Participant’s Guide

4. Which of the following are true about a secured credit card? (Select all that apply).

a. Uses your savings as collateral

c.

Helps you build your credit score

d. Available to almost anyone, regardless of your credit history

A secured card is usually available to people with any credit profile

What is true about predatory lending? (Select all that apply)

The lender approves a loan based on your credit score

The lender reports payments to credit reporting agencies

The company is deceptive in its advertising

APRs are less than traditional lenders

Predatory lenders often offer loans to people without a credit check, they may be deceptive in their advertising, costly and may not report payments to credit reporting agencies.Slide35

Assignment Today’s Lesson

(Financial Empowerment Passport)

Review Affordable Housing Guide

Obtain a Copy of your ChexSystems Report

Consider registering with

www.donotcall.gov

Discuss with your

coach

potential threats to your credit

Continue budgeting so that you can have three months of living on a budget prior to the end of the challenge

Continue saving so that you can have three months of savings growth and at least $300 of an emergency fund by the end of the challenge

Read Web Tools Resources Guide

www.bankonhr.org

Read Homework Notes

Reconcile Bank Statement

Make contact with your Coach Slide36

Questions?