The Handy Investing Answer Book. Paul A Tucci
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Название: The Handy Investing Answer Book
Автор: Paul A Tucci
Издательство: Ingram
Жанр: Ценные бумаги, инвестиции
Серия: The Handy Answer Book Series
isbn: 9781578595280
isbn:
Why are front- and back-end ratios important?
Front- and back-end ratios are important because they indicate to lenders and creditors how much debt you can afford.
Why use a debt-to-income ratio?
In order to prevent people from buying a house they may not be able to afford, lenders will establish how much debt you can handle, and use this as one factor to determine your loan amount.
How much debt can I afford?
The amount of debt you can afford depends roughly on your front-end and back-end ratios, or debt-to-income ratio. Although the use of the ratios differs from lender to lender, on average your front-end ratio should never exceed 28%, and your back-end ratio should never exceed 36%.
What if my debt-to-income ratios are higher than average, and a lender still will give me a loan?
Just because a lender qualifies you for a loan, that does not mean you should take it. The lender may not care about your long-term financial success. Having a worse than average debt-to-income ratio means trouble on the horizon if not corrected, and should signal action on your part to reduce the debt.
What is “debt consolidation”?
Debt consolidation is the act of taking out a loan in order to pay off several others. Assume that you have credit card debt carrying interest rates as high as 20%, and you have a home mortgage (with some equity in your house) with an interest rate of 5% for 30 years. In a consolidation, you take out a home equity loan (which charges a smaller interest rate) for the value of your high-interest credit card debt, and then make payments on your equity loan until the debt is repaid.
What is a “debt consolidator”?
A debt consolidator provides a service wherein he looks at a client’s debt situation and creates a strategy designed to pay off the debt, in exchange for a fee.
What is the trouble with debt consolidators?
According to many experts, the main trouble with the debt consolidation industry is that it is a largely unregulated business, and many companies that promise unsuspecting families assistance end up taking fees and leaving town. They may promise to work with banks to arrange for your loans, and in the end may take what little money you have.
Be careful whom you choose to assist you with debt consolidation. The industry is barely regulated by the government, and you might get an unscrupulous “debt consolidator” who will leave you high and dry.
How do I check the credibility of a debt consolidation company?
It is important to check with your state’s attorney general’s office, as well as the Better Business Bureau, before seeking the assistance of a debt consolidator. You may also search online to see if there have been any negative comments or stories written about the company. Check with the company’s references to see if the company is legitimate. Also, contact the local chamber of commerce in the city in which the company is located to see if there are any complaints about it. If you sense any time pressure from a pushy debt consolidation representative, find another company. This is a sign that the business may not be legitimate.
How might I locate the name of a legitimate debt consolidator?
To find the name of a legitimate debt consolidation company, many experts suggest you visit the National Foundation for Credit Counseling website to identify registered members. After selecting a credit counselor, you may then meet to identify a reputable debt consolidator, if it is recommended as a strategy.
If I have a much lower interest rate for my old credit card debt, by using the equity I have in my home, what else could be wrong with debt consolidation?
After you consolidate all of your debts into one loan, it may be amortized over many years. Because the debt is now spread out over a long period of time, if you make the minimum payments each month, you may pay much more in interest to retire the debt.
What steps can I take to minimize my credit card and other debts?
According to experts at the Federal Trade Commission (FTC), the first step to liberating yourself from credit card debt is to get a realistic picture of your income and your expenses. You may divide your expenses into two categories: fixed expenses, meaning those expenses that don’t really change from month to month, such as rent or mortgages; and variable expenses, items that may change from time to time, such as utilities, food, and entertainment. If you have received notices from creditors, you should contact them directly and ask to arrange for a way to reduce your monthly payment to a reasonable level. Stop using your credit cards so that you may begin to improve your financial picture. The FTC notes that your debt can be secured or unsecured. When debt is secured, ownership is not conveyed until all payments are made, such as your house or car. If you stop making payments, you may lose that asset. When debt is unsecured, it is granted with no ties to any particular asset, such as credit cards, signature loans, and medical bills. But most lenders are willing to work with you to create a more reasonable payment plan, so you should speak with your creditor when you have a problem. Creditors—especially credit card companies—may change the terms of your agreement and reduce your annual percentage rate to a more reasonable level.
How does credit card debt affect older Americans?
According to a recent report by the AARP (formerly American Association of Retired Persons), older Americans (those over age 50) carry more credit card debt than younger Americans. Half of these older Americans carry some medical-related bills on their credit cards, especially prescription bills and dental expenses. Forty-nine percent of older Americans reported that car repairs also contributed to their credit card debt; 38% stated that home repairs contributed to their overall credit card debt; 34% rely on using credit cards to pay for basic living expenses such as rent/mortgage payments, food, and utilities, because they lack the cash in their checking and savings accounts to pay for them; 25% of older Americans say that a loss of employment contributed to their credit card debt; 18% drew upon retirement funds to pay down debt; and 23% got into debt in order to help other family members.
How much total debt should I have?
To be safe financially, the monthly payments on all your debt should be less than 36% of your monthly gross income.
What steps can I take to increase my available funds so that I may invest?
The most important step to increasing your funds available for investing is to understand your true financial picture by taking into account your income from all sources, your complete debt picture (including all loans, credit cards, and other obligations), understanding your daily or monthly expenses, paying special attention to areas where you can eliminate or reduce these expenses, and directing this money to investments that earn a return.
When is taking on debt a good idea?
Increasing your debt may be beneficial if the loaned capital is put to good use, as in purchasing real property (that may be valuable or increase in value over time), by obtaining an educational loan that may increase your earning power in the future, and by using a home equity loan to improve your СКАЧАТЬ