good-debt-vs-bad-debt « WordPress.com Tag Feed

Personal Debt level concerns are overblown according to Equifax stats.

Steve Garganis — Mon, 04 Feb 2013 13:55:43 +0000

So here we go again.. More stats that show our personal debt levels aren’t out of control

$600billion, $250billion, 2.99%, $1.5trillion... numbers to watch in 2012

Steve Garganis — Wed, 08 Feb 2012 13:30:11 +0000

$600billion….Recently, we heard that there was another crisis looming in the mortgage industry

Good Debt vs Bad Debt – What Does It Mean

Patrick Parker Realty — Wed, 17 Aug 2011 20:25:16 +0000

Given the lengthy and heated debate going on about the country’s debt, this may well be a good time to think about your personal debt philosophy and/or situation. While it’s almost impossible to live debt-free, it is important that we analyze and manage our loans; we all have seen in recent years the economic repercussions of taking on too much debt, both nationally and individually. Experts say that ideally your total monthly long-term debt payments should not exceed 36% of your gross monthly income, but the real challenge is to judge which debt makes sense and which does not. Economic advisors suggest that you first recognize that some of your obligations are considered good debts, whereas some might fall into the category of bad debts.

Good debts are those which can be looked at as investments and those which will contribute to your overall financial health. The best example of good debt has been for many years the purchase of a Jersey Shore home and is still considered as such by many. Another good debt would include a student loan to finance higher education. Financing a car is also perceived as good debt provided that you make as large a down payment as you can reasonably afford and that you intend to keep the vehicle as long as you are paying for it. Generally speaking, good debt includes the purchase of items which you could not afford without wiping out your cash reserves or liquidating your investments.

On the other hand, bad debt occurs when you borrow to purchase a consumable item without fully comprehending the influence of that purchase on your financial well-being. Excessive credit card use is an excellent example of bad debt, especially given the high interest rates charged. One obvious flaw in the credit card system is that it encourages users to purchase things they can’t really afford, a posh vacation or the addition of a pool for their Jersey Shore home e.g., without having to pay for them at the time. It goes without saying that payday loans and paying pawn shop interest are very poor—and costly—practices which should be avoided entirely.

How to manage your debt? You can begin by figuring out your credit utilization or your debt-to-credit ratio, which tells you how much you have borrowed of the total amount available to you. The lower the percentage, the better for your credit rating. Creating a plan to pay off your bad debts, especially those with high interest rates, is another important step in achieving financial stability. Many financial counselors urge borrowers to pay off credit cards and car loans before considering taking on student debt or a mortgage for a Jersey Shore home. Another strong caveat is not to pay off one loan with another, such as using a home equity loan to repay bad debt. The best practice is to use cash to pay off debt. One way to increase your available cash is to analyze your spending pattern and carefully monitor unnecessary expenses. Other suggestions for managing debt include taking steps to lower household bills, refinancing a mortgage for a lower interest rate, and requesting a reduced rate of interest from credit card companies.

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Patrick Parker and his Realty Team are experts in Buyer Brokerage and specialize in representing your best interests, negotiating with your goals in mind and getting you the best possible deal when you buy your next Jersey Shore home.

When representing you as a Seller, they go the extra mile to help you achieve your goals. Patrick and his Team are constantly researching the market and property values so your Jersey Shore real estate is priced effectively from day one. They also make sure the public knows your home is for sale by using innovative advertising and marketing techniques to attract potential buyers.

For more information about buying or selling a Jersey Shore home, please call Patrick at 732-455-5252 or via email with our convenient contact form.

Credit card companies modifying more credit card debt.

ndminc — Tue, 20 Oct 2009 16:00:18 +0000

Are you carrying a lot of debt on credit cards? Have your interest rates skyrocketed? You may be able to negotiate a better deal according to a report in The Washington Post.

As credit card defaults soar past 10%, credit card companies are realizing something is better than nothing. Lenders are restructuring credit card accounts by lowering interest rates or minimum monthly payments for a specific period of time, waiving fees or settling the debt by accepting less than what is owed.

Most card issuers don’t want to talk about the practice because they fear they’ll get too many calls, but industry executives have confirmed the changes in credit card company practices. Moody’s reports that the charge off rate for credit cards was 10.52% in July and is expected to reach at least 12% by the middle of next year. Not surprising to hear when they raised so many people’s interest rates to 20 or 30% or more.One debtor the Post mentions in its story worked out a modification on credit cards with Citi and Chase to lower his 20% rates as long as he agreed to close the accounts. Both companies agreed to a 6% rate immediately. When he decided not to accept the offer from Citi, a representative offered 0% for 12 months as long as he gave up his cards.

Here’s what spokespeople told the Post regarding their credit card-modification policies:

* Bank of America said it expects to modify 1.2 million credit card accounts this year, up from 1 million last year.

* Chase is making it easier for those in the earlier stages of delinquency to get modifications. Last year it restructured credit lines for more than 600,000 customers, It expects the need for modifications to increase this year.

* American Express would not comment on how many people are enrolled in repayment plans, which can include forgiving some debt, but did confirm it is offering repayment programs more frequently.

*Citi says it’s proactively reaching out to customers not delinquent but showing signs of stress. It’s modifying interest rates and matching payments to help customers retire debt more quickly.

If you do seek to modify credit card terms, your credit score will likely be hit negatively initially. But as you make on-time payments and pay down your debt levels, your score will go back up.

Good debt vs. bad debt

ndminc — Tue, 20 Oct 2009 15:54:28 +0000

Good debt vs. bad debt

Sometimes it makes sense to borrow – a lot of times it doesn’t.

It’s almost impossible to live debt-free; most of us can’t pay cash for our homes or our children’s college educations. But too many of us let debt get out of hand.

Ideally, experts say, your total monthly long-term debt payments, including your mortgage and credit cards, should not exceed 36 percent of your gross monthly income. That’s one metric mortgage bankers consider when assessing the creditworthiness of a potential borrower.

It’s far too easy to spend more than you can afford, especially when you pay by credit card. The average U.S. household with at least one credit card carries nearly a $10,700 balance, according to CardWeb.com, and personal bankruptcies have hit record highs in recent years.

Of course, avoiding debt at any cost is not smart either if it means depleting your cash reserves for emergencies. The challenge is learning how to judge which debt makes sense and which does not and then wisely managing the money you do borrow.

Good debt includes anything you need but can’t afford to pay for up front without wiping out cash reserves or liquidating all your investments. In cases where debt makes sense, only take loans for which you can afford the monthly payments.

Bad debt includes debt you’ve taken on for things you don’t need and can’t afford (that trip to Bora Bora, for instance). The worst form of debt is credit-card debt, since it usually carries the highest interest rates.

Sometimes the decision to borrow doesn’t hinge on how much cash you have but on whether there are ways to make your money work harder for you. If interest rates are low, compare what you’ll spend in interest on a loan versus what your money could earn if it were invested. If you think you can get a higher return from investing your cash than what you’ll pay in interest on a loan, borrowing a small amount at a low rate may make sense.