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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
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