Dump Your Debt

Migdalia Gomez ,Community Engagement Manager

Sarah Scruggs, Community Engagement Specialist

WHERE ARE

YOU NOW?

LIST YOUR DEBTS

And monthly payments!

Visit www.HUECU.org/HUB for this and other handouts.

Amount APR TermsMonthly

Payment

$10,000 7.5% 120 months $119

$5,000 18.0% 60 months $127

CALCULATE THE

COST OF YOUR DEBTTotal Interest

Paid

$4,244

$2,618

Total

Amount

Monthly

Payment

Total

Interest

$15,000 $246 $6,862

ROAD(S) TO

REPAYMENT

• Personal Loans

• Refinancing Loans

• Mortgage Refinancing

• Auto Refinancing

• Student Loan Refinancing

• Debt Consolidation Loans

• Credit Card Balance Transfers

LOOK FOR

LOWER

RATES

Extending the terms

• may lower payment, butincrease total loan payments.

Benefits and conditions

• of the original debt, may not

apply once you refinance.

STUDENT LOANS

• Federal Consolidation

• Combines your loans into one.

• Studentaid.gov

• Private Refinancing

• Combines your loans into one.

• Typically based off your credit.

• May reduce your interest rate.

• Lose federal benefits.

RESEARCH TAX LAWS

• Student Loan Interest Rate Deduction

• Up to $2,500

• Home Mortgage Interest Deduction

• Home Equity Loan Interest Deduction

Visit IRS.gov or consult a tax professional for

details. Some deductions may not be applicable to

your specific situation.

CREDIT IMPACT:

RATES AND PAYMENTSCREDIT

SCOREAPR

MONTHLY

PAYMENT

ADDITIONAL COST

IN A YEAR

720-850 4.23% $741 $0

690-719 5.68% $757 $192

660-689 7.73% $780 $468

620-659 11.29% $822 $972

590-619 16.28% $882 $1,692

500-589 17.71% $900 $1,908

<500 Not eligible ---- ----

If your credit improves, you may be able to refinance your debt.

Source: Myfico.com – 36 month car loan - $25,000

ADDITIONAL COST

AFTER 3 YEARS

$0

$576

$1,404

$2,916

$5,076

$5,724

----

ANNUALCREDITREPORT.COMReceive a free weekly copy of report from each of 3 bureaus until

April 2021.

COMPARE

YOUR OPTIONS

1.99% balance

transfer for 12

months, then 10.99%

TEMPTING OFFERS

Debt consolidation loan

at 7.99% for 5 years.OR

$10,000 at 21% and you can comfortably pay $300/month.

WHAT WOULD YOU DO?

IT DEPENDS…

1.99% for 12 months

Payments would be $842

Total interest $108

$300 / month

Would pay balance in 38 months

Total interest $964

First 12 months at 1.99% then 10.99%

$203 monthly payments for 5

years

Total interest $2,162

$300 / month

Would pay balance in 38 months

Total interest $1,343

OR OR

REPAYMENT STRATEGIES

SNOWBALL

Focus on smallest debt first.

Build momentum

AVALANCHE

Focus on highest interest first.

Start high then level off

SPRINKLE

Spread extra payments as

you’d like.

A) $1,000 at 25%at $95/month

B) $500 at 15% at $45/month

Snowball

Loans

Total $140/month

B) $105 monthly towards $500 loan

4.8 months and $19 interest

A) $95/month for 5 months

$200/month for 4 months

9 months and $115 interest

Avalanche

A) $155 monthly towards $1,000 loan

8 months and $85 interest

B) $45/month for 8 months

$200/month for 1 months

9 months and $24 interest

What if you paid extra $60?

SNOWBALL

VERSUS

AVALANCHE

WHAT

MOTIVATES

YOU?

WHERE SHOULD A

$10,000 PAYMENT GO?

* DOWN PAYMENT

OR PAY OFF DEBT?

TOTAL INTEREST AT END OF LOAN

MORTGAGE* STUDENT

LOAN**

MORTGAGE

INTEREST

STUDENT LOAN

INTEREST

TOTAL INTERESTS

$400,000 $50,000

*5% APR for 30 years; mortgage only, assuming $0 PMI;

taxes and insurance not included.

** 7% APR for 15 years

EXAMPLE ONLY FOR ILLUSTRATIVE PURPOSES.

TOTAL INTEREST WILL VARY BASED OFF RATES AND TERMS.

$400,000 $40,000 $373,023 $24,716

$390,000 $50,000 $363,698 $30,895 $394,593

$397,739

$403,918$373,023 $30,895

OUTSMART YOUR DEBT

INTEREST

RATE

MONTHLY

PAYMENT

INTEREST OVER

LIFE OF THE LOAN

TOTAL COST OF

LOAN

Current

Loan18% $254 $5,236 $15,236

Refinancing

(same term)10% $212 $2,748 $12,748

Pay more

minimum10% $254 $2,170 $12,170

$10,000 loan at 18% for 5 years

Round Up 10% $275 $1,963 $11,963

Paid off in 3.7 years and

save $3,273 in interest.

HUECU.ORG/CALCULATORS

WHAT IF DEBT IS GREATER

THAN INCOME?

DEBT MANAGEMENT PLAN (DMP)

• Reduce interest rates on

debts

• Provide financial

counseling

• Cost based off state

($75 max monthly in MA)

• Debt Management Plans

are not the same as Debt

Settlement.

CREDITOR PAYMENT

BEFORE DMP

PAYMENT ON

DMP

Creditor A $132 $76

Creditor B $235 $185

Creditor C $80 $76

Creditor D $62 $22

Creditor E $518 $413

Creditor F $81 $68

$1,108 $840

DMP: PROS and CONS

75%

76%

GREENPATH

FINANCIAL

WELLNESS

Empowering people to lead financially healthy lives.

• Free for HUECU community

• Budget counseling

• Credit report review

• Immediate counseling

• Confidential

• Flexible Hours Monday –Thursday 8 a.m. - 10 p.m.

Friday 8 a.m. - 7 p.m.

Saturday 9 a.m. - 6 p.m.

HUECU.org/GreenPath

877-337-3399

75%

76%

1. Ace Your Credit Score

2. Understand What You

Owe

3. Do The Math.

4. Know Your Personality.

5. Reduce, don’t add, Debt.

NEXT STEPS

This presentation is a general overview of principles you may want to

consider. Only you can decide what is best for you. This presentation is

educational in nature and is not intended to be, and should not be construed

as, tax, legal, retirement or investment advice. You should always consult a

certified advisor for advice on those topics. The examples used in this

presentation are for illustrative purposes only.

@myhuecu