This episode is sponsored by National Debt
Relief, a Better Business Bureau A+ accredited business with over 13,656 client reviews and
growing daily. They can help you reduce your debt to a fraction
of what you owe if you qualify. Get a free report comparing all your debt
relief options at https://www.nationaldebtrelief.com/HTA [♪♩INTRO] Friends, today we’re going to talk about
a word that starts with “D” that you’re not supposed to discuss in polite company. Good thing we’re not very polite company! Today we’re gonna talk about, yes, debt. Carrying some kind of debt is a pretty normal
part of being an adult in today’s society. Consider this episode as an introduction to
the kinds of debt that you might encounter throughout your lifetime. What kind of debt you have affects your credit
score, and your credit score is super important. It can affect everything from opening a bank
account to buying a car to renting an apartment to even buying a home. Some employers even look at applicants’
credit scores, so yeah, it’s a big deal. There are some times when your credit score
may need to take a back seat to getting out of debt but we can talk about that in another
video. All that said, you’re taking a good step
by learning how all this works! For many people, deciding whether to take
out loans to go to college for the first time can be their first big experience with debt
and managing money. Depending on how much money your parents make
and what kind of aid you qualify for, you might get government-subsidized student loans
or private loans, which tend to have higher interest rates. You can take out student loans even if you
don’t have a credit history, and some loans let you take out as much as you want, but
remember, the choice you make at the age of 17 or 18 might follow you for the rest of
your life. Pros: You can go to college and making loan
payments builds your credit history. Cons: If you take out too much or can’t
find a good-paying job after college, you might be stuck paying off your student loans
for decades. Defaulting on your loans–where you admit
that you can’t pay them–is a serious choice that could impact your financial future for
the rest of your life. The other thing you should note before taking
out student loans in the U.S. is that it is extremely difficult to file bankruptcy to
get rid of them. There are still many ways to try and make
college a little more affordable, and we have a few videos on the topic in the description
below. I didn’t really have a strategy when I was
18, I wanted to go to a four year university right off the bat, but then I realized I can get the same education at a community college for the first two years for less than a 5th
of the price of a 4 year university. Credit cards: Every time you use a credit card, you’re
taking out a small loan that you promise to pay back to the credit card company with interest. The most common type of credit card is unsecured,
meaning it’s not backed by collateral. If you don’t pay your credit card debt,
the company can’t take your home or car, but it can try to sue you depending on how
much you owe and what state you live in. Lawsuits are expensive though so they
usually try to settle before suing you. Pros: You can make purchases even if you don’t
have the cash in hand, and you’re building your credit score if you pay back on time. Some credit cards also offer reward programs
that offer things like airline miles, store discounts or cash back. Cons: If you don’t pay your credit card
bill in full every month, you will pay interest. It can also be really easy to rack up thousands
in debt and end up paying two or even three times as much as you originally borrowed. Medical debt: Forty-three million Americans have overdue
medical bills listed on their credit report, according to a 2014 study from the Consumer
Protection Bureau. Big debts from unexpected hospital stays can
really add up, and unfortunately, unpaid medical bills do affect your credit score. There is a little bit of good news. In mid-2017, the three major credit bureaus,
Experian, Equifax and Transunion, added a six-month grace period for consumers to resolve
medical debts before it appears on their credit report as an unpaid bill. It’s not a solution to an ongoing massive
issue, but it might offer some relief. Payday loans: These are small, short-term loans that usually
come with really high fees and interest rates. Payday lenders are typically geared toward
low-income people who are strapped for cash and need to borrow some money to make it to
the next payday, ergo the name. Pros: Low-income people can borrow money even
if they don’t have good credit histories. Cons: High fees and interest rates can
trap people in a cycle of debt if they can’t pay off the loans. Payday lenders are controversial and highly
regulated in many states. Car loans: One of your first big purchases in life could
very well be a car. Whether you’re buying new or used, make
sure that you’ve already checked with your bank or credit union to find out what kind
of car loan you qualify for before you go shopping, and make sure that you can commit
to monthly car payments if you can’t afford to pay for the vehicle up front. Look at the final purchase price of the car,
not the monthly payment, to make sure you really are getting a good deal. Pros: If you pay off the car on time, you’ll
establish great credit history that will be useful for years to come, and, uh, you’ll
have a car to drive. Cons: If you sign up for a payment that’s
not realistic, you could find yourself struggling to make ends meet every month. And if you don’t make the payments, you
won’t get to keep your car. Mike & Emma made a video on how to buy a car,
so check out that link in the description. Home loans: Hopefully, you’ve built good credit and
saved up a lot of cash before you start to looking to buy a home. When you’re buying a home, you can usually
expect to pay a (relatively) small chunk of cash up front– a cash down payment–and the rest
over the next few decades in a monthly mortgage payment that you owe to the bank that loaned
you the money to buy the house. The more you can afford to pay up front, the
less time you’ll spend paying the mortgage and the interest and insurance that often
comes with it. Pros: Instead of paying rent, you’re paying
money into an asset that you’ll eventually own, and hopefully it will appreciate in value
over time, offsetting the cost in the long-run. Cons: If you get into dire financial straits
and get behind on your mortgage payments, the bank might foreclose on your home and
take it back. Even in the best circumstances of home ownership,
you should also expect to spend money on property taxes, homeowners insurance and maintenance
fees. Home equity loans: Let’s say you want to take out a big loan
to pay for something major, like a home renovation, your kids’ college education or starting
a new business. If the house that you’re paying on is worth
more than the amount of money you still owe on it–or you own the house–you can take
out a home equity loan. Pros: These loans are usually low-interest,
since the bank knows it can take your house if you don’t pay the loans back. Cons: Since the housing crisis of 2008, these
kinds of loans are harder to get. You also run the risk of losing your house
if you don’t make the payments. Debt consolidation loan: If you’ve got so many bills to pay off that
you don’t know how to deal with them, a debt consolidation loan might an option for
you. Consolidation loans are typically geared toward
people with a lot of unsecured debt spread among different places, like credit cards,
medical bills or overdue utility or rent. As we learned a few minutes ago, unsecured
debt means there’s no collateral attached to it. A secured loan, like your house payment, isn’t
likely to qualify for consolidation. So, if you have a ton of unsecured debt owed
to different companies, you might be able to talk to a debt counselor and seek a debt
consolidation service that will help negotiate your loans into one interest rate and one
monthly payment. Pros: You’ll improve your credit rating
and get fewer calls from collection agencies, and, hopefully, get on the path toward straightening
out your financial life. Cons: You have to be very disciplined about
your spending and pay the loan every month. If you’re struggling with one or more kinds
of debt we’ve talked about today, you’re not alone. For this series we partnered with National
Debt Relief, a Better Business Bureau A+ accredited company with over 13,656 client reviews from
folks who were able to resolve their debt. National Debt Relief is a debt settlement
company that will negotiate with creditors on their client’s behalf to reduce the amount
of debt owed and consolidate it into a single lump sum. They’re completely performance based and
charge no fees until their clients see their debt reduced. Their program is recommended for consumers
who have over $10,000 in unsecured debt, and they offer a free savings estimate that can
show consumers how much they can save with no obligation. Visit https://www.nationaldebtrelief.com/HTA
to get a free report comparing all your debt relief options. See you next time for part two, where we’ll
talk about ways to get your finances back on track. [squealing noise] 43 million Americans have overdue mill—million bills Same thing. Before you start looking to h—buy a home. [small squeak]
[laughter] National Debt Relief is a da— Aw, no. It’s not a dad. See you next time on part 2, where we’ll talk about ways to get your financial back on track. Nope. [laughter] Perfect!
We did it. Yay!
3 minutes to spare!