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Financial Literacy Cougar Money Matters

Debt

Debt is essentially described as; a state of being under obligation to pay or repay someone or something in return for something received, in this case, however, it refers to the total sum of all the money you owe. No matter what kind of debt you may be in, it is important to construct a detailed payment plan. The quicker you can pay your debt off, the less interest that will accrue.

  • You must recognize that credit=debt=your obligation to repay.
  • Debt can be secured or unsecured
    • Secured debt is backed by an asset such as a car or home. If you do not pay, the lender can take the accompanied asset
    • Unsecured debt is not backed by an asset, and if you do not pay what you owe, the lender can take you to court and gain possession of comparable assets

Debt/Income Ratio

This helps you to compare the amount of money you owe, to the amount of money that you earn. If your debt/income ratio is less than 10%, then that means that your finances are exceptional. Percentages ranging from 10-20 may indicate that you are financially in a good position, but anything above 20% may mean that you need to re-assess your debt load. If your debt/income ratio is too high, creditors may be less likely to issue you a loan if needed, and also, interest rates tend to be higher if the loan is approved. Your debt/income ratio can be calculated by following the steps below;

  1. Calculate all monthly debt payments
  2. Take your gross annual wages and then divide that number by 12 to get your monthly income
  3. Take your monthly payments and divide it by your monthly income
  4. Move the decimal point to spots to the right, that number is your debt/income percentage ratio

Credit and Debt Management

In our day and age, good credit is almost essential when looking into renting, buying, taking out a loan, and even being employed. When you’re hoping to take out a loan to pay for school, buy a car, or buy a house, your credit score is taken into consideration and may affect your rate of acceptance. Oftentimes, lower interest rates come with having a higher credit score.

 

Guide to managing finances

The Washington State Department of Financial Institutions’ free “Right on the Money” booklet is a quick-start guide to personal finance for college students. Budgeting, debit, credit, and savings are all discussed. As well as some pointers on how to keep your debt to a minimum. Order a free booklet today or view it online in PDF format.

Credit Reports

Every time you borrow money. whether that be from a credit card or any type of loan, the information is gathered by credit agencies. With this information, your credit score is generated. Your credit score is essentially your credit history reported as a number. There are five major inclusions in your credit score;

  • Payment history
  • Credit balance and utilization rate
  • Length of credit history
  • Recent applications
  • Types of accounts

You can access your credit report online for free once every 12 months at annualcreditreport.com.

Helpful Videos 

Getting Rid of Credit Card Debt

Choosing a Credit Card

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Find out if you’re ready to handle your first credit card with this quiz¬†here!