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3/3/16 Millennial Faith & Finance 2.0
Transcript of 3/3/16 Millennial Faith & Finance 2.0
In this session, we will address:
Understand credit and borrowing
Types of debt
Types of Debt
Pay day loans
: utilizes a form of collateral, house or car
: no collateral, credit cards or personal loans
Fixed interest rate debt
: the same interest rate for the entire timeline of the loan
Variable interest rate debt
: the interest rate may change over the life of the loan
Fixed payment term
: the loan is set to be paid off by a certain date, like a student loan
Variable repayment period
: There is no set date by when the debt must be repaid, like credit cards
: IRS permits this loan to have tax benefits
: a loan that is not used to purchase an appreciating asset or new skill, like credit cards or a personal loan
A beginner's guide to paying off college financial aid:
Dee-1 "Sallie Mae Back"
Millennials Credit Situations
2 Timothy 2:3-7
3Join with me in suffering, like a good soldier of Christ Jesus. 4No one serving as a soldier gets entangled in civilian affairs, but rather tries to please his commanding officer. 5Similarly, anyone who competes as an athlete does not receive the victor’s crown except by competing according to the rules. 6The hardworking farmer should be the first to receive a share of the crops. 7Reflect on what I am saying, for the Lord will give you insight into all this.
All who are prudent act with knowledge, but fools expose their folly.
Debt Repayment Strategies
Varies depending on the type of debt
Goal is always to repay amounts owed
Reduce amount of interest paid
Reduce interest rates, cost of loan
Focus on economic justifications first, not only tax benefits
Tax consequences for forgiven debts
"Good debt vs. Bad debt"
Reverend Loxley O’Connor, MDiv, CPA
Director of Business and Financial Affairs
Reid Temple AME Church , Inc.
The Road to Financial Freedom
March 3, 2016
Student Loan Repayment
Understanding Repayment Plans
Credit Card Debt
Know who, what, where and when first
Consolidate wherever possible
Refinance but avoid extensions if possible
Pay more than minimum payment
Pay with excess cash received(bonuses, raises, gifts)
Consider jobs that offer forgiveness
Federal Government will pay up to sixty percent of student loan debt for eligible employees
Go to StudentLoans.gov
Standard Repayment Plan
: 10 years to pay back
Extended Repayment Plan
: $30,000 in debt can extend repayment up to 25 years.
Graduated Repayment Plan
: Payments start out low and increase every two years, during a ten-year repayment period.
Income-Based Repayment Plan
: minimum monthly payments are capped at 15% of your discretionary income
Income-Contingent Repayment Plan
: based on your salary and family size, eligible for forgiveness, if unpaid after twenty five years.
Pay As You Earn Plan
: with financial hardship can have their monthly payments limited to ten percent of their discretionary income, eligible for forgiveness
Never borrow with a negative loan to value ratio
Refinance your mortgage.
If you own 20% or more equity in your home, make sure you aren't paying for private mortgage insurance (PMI).
Fight the tax assessment. Many mortgage payments include property taxes, which is determined by your county.
Pay one extra principal payment each year
Consider paying bi-monthly payments
Whenever possible use a fifteen year mortgage loan
Not amount, its utilization : keep credit utilization low
Use only for emergencies
Only purchase items that you can repay in one billing cycle
Pay higher interest rate cards off first -
Pay off card with the lowest balance first-
Consolidate balances and destroy excess cards-
Avoid secured credit cards-
spending not credit
Consider using savings account to pay your credit card
Do not be deceived into...
Distrusting God’s goodness
Disbelieving God’s word
Rejecting God’s authority
Let's Talk about Credit
What is a FICO score?
1 Peter 4
Don't copy the behavior and customs of this world, but let God transform you into a new person by changing the way you think. Then you will learn to know God's will for you, which is good and pleasing and perfect.
Romans 12:2 NLT
Above all else guard your heart, for everything you do flows from it.
…Your heavenly Father knows that you need all these things. But seek first the kingdom of God, and His righteousness; and all these things shall be added to you”
...and my God will meet all your needs according to the riches of his glory in Christ Jesus
God knows and supplies
Scripture provides the answers
Discipline is key to results
Faith requires that my clock, my resources, and my time lines up with my compass - the direction I'm trying to go.
6Humble yourselves, therefore, under God’s mighty hand, that he may lift you up in due time. 7Cast all your anxiety on him because he cares for you.
8Be alert and of sober mind. Your enemy the devil prowls around like a roaring lion looking for someone to devour. 9Resist him, standing firm in the faith, because you know that the family of believers throughout the world is undergoing the same kind of sufferings.
10And the God of all grace, who called you to his eternal glory in Christ, after you have suffered a little while, will himself restore you and make you strong, firm and steadfast. 11To him be the power for ever and ever.
Most fundamental understanding: Borrowing capacity
Click on calculators
How much mortgage might I qualify for?
Gross monthly salary
Ratio for Mortgage Loan
Existing commitments/student loans
Borrowing Capacity $$$
Credit scoring is a method of determining the likelihood that credit users will pay their bills.
A credit score attempts to condense a borrowers credit history into a single number.
Any score under 600 could be considered a risk to “some” lenders.
National Average is 693
Factors that Determine Your Credit Score