Strategies for Getting Out of Debt

Strategies for Getting Out of Debt

By Aaron Walker

Something that is owed or due, usually money

​

Lessen your stress about money

​What is debt?

• People or companies to make large purchases or purchases they can't afford to pay now

• ​People or companies that are making more in interest from investments than they would pay in interest.

​

Lessen your stress about money

Who uses debt?

• ​Secured

• Unsecured

• Revolving

• Mortgage

​

Lessen your stress about money

​Types of Debt

​

• Amount owed is secured by collateral

  ​

• ​Collateral is property or other valuable assets pledged as security

  ​

• Collateral may be sold if borrower doesn't pay

  ​

Lessen your stress about money

​Secured Debt

• ​Does not require collateral as security

  ​

• Borrower's credit profile is a primary decision factor

  ​

• ​Examples include automobile loans, student loans and most credit cards. This is why you care!

​

Be sure to look into Grants and Scholarships

​Unsecured Debt

​

• An amount a borrower can continuously borrow from

  ​

• Use money to credit limit, pay it back, borrow again

  ​

• Most common are credit cards​

  ​

You will likely have a credit card in the near future

​Revolving Debt

​

• Debt issued to purchase real estate​

  ​

• ​What is purchased is the collateral for the loan

  ​

• Several types of mortgage loans.​

  ​

Usually the largest debt consumers will ever owe.

Mortgages

" Total debt has increased over the past 12 months, although revolving credit card debt is down, and the cost of living is growing faster than household incomes." 

​https://youtu.be/ib-0_N9G0Lo

Multiple Choice

. 

What is NOT a reason that someone would or should incur debt?

• . 

  To help establish a payment history

• To cover expenses that they can't pay for in cash now, like a student loan or car.

• To go on a dream vacation

• To purchase a house

​Actually...

Most experts advise against taking out loans for something that you want (vs need) and doesn't result in ownership. So taking a dream vacation is something you would not take out a loan for. However, if you are using your credit card for the trip and pay it off right away (before interest), go have fun!

So you should've chosen "C"​

Multiple Choice

Which type of debt usually has the highest interest rate?

• A mortgage

• A student loan

• A car loan

• A credit card

​Actually...

Federal student loans usually have the lowest interest rates. Credit cards have the highest rates.​

So you should've chosen "D"​

​

• Snowball

  ​

• ​Avalanche

  ​

• Debt Consolidation Loan

  ​

Methods of climbing out of that hole

​Debt Repayment Strategies

​https://www.youtube.com/watch?v=PvEUj_mRfIo

Multiple Choice

Which debt repayment method will typically cost you the least?

• Avalanche

• Debt Consolidation

• Snowball

Multiple Choice

Which debt repayment method is usually most successful?

• Avalanche

• Debt Consolidation

• Snowball

Multiple Choice

Which debt repayment method starts with paying off the highest interest loan first?

• Avalanche

• Debt Consolidation

• Snowball

Multiple Choice

Which debt repayment method combines all of your debts into a single loan?

• Avalanche

• Debt Consolidation

• Snowball

Multiple Choice

Which debt repayment method usually takes the longest to complete?

• Avalanche

• Debt Consolidation

• Snowball

Multiple Choice

Which debt repayment method works by paying off the debts from lowest balance to highest balance regardless of the interest rate?

• Avalanche

• Debt Consolidation

• Snowball

Multiple Choice

Which debt repayment method is considered to be the most motivating because successes are seen earlier and more often?

• Avalanche

• Debt Consolidation

• Snowball

Multiple Choice

Which debt repayment method often results in more debt because borrowers see empty credit card balances and start charging again?

• Avalanche

• Debt Consolidation

• Snowball

Poll

Which method of debt payment do you think would work best for you?

• Avalanche

• Debt Consolidation

• Snowball

Open Ended

Why did you choose the method you chose?

​It's a Wrap

• Some people think all debt is bad, but is it realistic for most people to buy a house or go to college without debt?

  ​

• At some point, it will make sense to have a goal to be debt-free! ​Be smart about debt!

The more you know!