Debt Pt. 1: A Primer on Borrowing Money


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!

26 comments on “Debt Pt. 1: A Primer on Borrowing Money”

  1. How to Adult says:

    Visit https://www.nationaldebtrelief.com/HTA to get a free report comparing all your debt relief options.

  2. Grumtum says:

    As a child, or "youth", I'm scared.

  3. TheNerdSwagg says:

    This channel helps me so much can't thank you enough!

  4. wearenough says:

    I’m sorry, but getting student loans to improve your credit score is terrible advice. Think harder about this. This is stater advice. Please do your own research. Don’t blindly take this advice. Talking about payday loans before auto loans! No discussion on subprime car notes which are flooding the market.

  5. Ane Emelia sings says:

    8:30 "if you're struggling with one or more kinds of debt we've talked about today, you're not a loan" THE PUN

  6. Paulee Monx says:

    The sponsor? I mean, wow. Such appropriate. Much appreciate.

  7. Donna L. says:

    Regarding private loans, it's best to avoid them whenever possible. They aren't subject to many of the benefits that federal student loans are, and they frequently have far worse collection practices. The Guardian ran an article about how private student loans often will continue to propagate inequality. Seriously, avoid them at all. They do not have income based repayment all the time. For instance, my loans in income-based repayment are $200/month. If they were private, they would be $600+ a month. If you're going into healthcare, there's also a chance that we will still (hopefully) have public loan forgiveness, too, which means after ten years of those payments you will have the rest waived if you work at a public agency.

    Don't put your loans into deferment or forbearance unless you have no other choice.

    Also, if you are thinking about graduate schools, investigate many universities and apply to several that have funding. You may be able to go to college for far cheaper. I wound up not paying for quite a substantial portion of my masters degree as a result. I have a graduate degree in clinical psychology. Many PhD programs pay a stipend and waive tuition if you get in, but you have to apply to 10-15 PhD programs often, and they are competitive. This means people get impatient and they go into PsyD programs, which can cost anywhere from 150-300k depending.

    Another tip for cheaper college: go to a community college for 2 years and then transfer. I did this and basically got a bachelor's degree that my classmates spent about 100k for and paid around 30k total, because I did not live on campus, and because I went to community college first and did all my pre-reqs. I got a private school degree for peanuts compared to others. They don't tell you this crap in highschool – I only knew because I went back in my 30s to get my BA and MA.

    Finally, if there's a career you are interested in, write a professional and see what they say. Some will even let you shadow them. Most of us are happy to answer questions. I found a counselor who was doing exactly what I wanted to do and then emulated the steps they took…this stopped me from getting the wrong degree, which is an expensive mistake. (I'm a psychotherapist with a clinical license.) Thing is, schools don't care if you make this mistake. They get paid regardless, and you are stuck with the wrong degree. Also, it helps show initiative for college applications too, if you network in your field, make connections, and demonstrate you are really passionate if you decide you like it 🙂

  8. Katrina Eames says:

    If you have student loans I would highly recommend that you pay off any interest on them that you can while you are in school. It will save you a ton of money in the long run.

  9. Nicole Pendleton says:

    Just a comment for all the high school/college age people out there: community colleges are a really great way to go. Keep in mind that when people call the "2 year school" It means that if you take full course loads for 4 semesters you can earn your degree. More often than not, you end up changing your major for one reason or another. Don't worry! It happens. I was one class away from having an associate's degree when I changed my major. I'm halfway through my 3 year of college and have finally transferred, but I also took summer and winter courses and max loaded my courses. I've taken about 30 classes so far AND I DO NOT HAVE DEBT. My younger sister on the other hand just finished her first semester and has $5000 in debt already.

    Moral of the story: don't hang yourself with debt when you're 18 and have other options.

  10. Muhtadi Abdul-Mujib Naser says:

    You know what future college students?
    YOU CAN'T CALL BANKRUPTCY ON YOUR STUDENT LOAN

    USA!

  11. From Scratch Aunty Bindy says:

    Pleeeease avoid payday lenders – they're a trap. Try finding micro finance organisations (often linked to not-for profits and/or religious groups) like in Australia we have Good Shepherd Microfinance, who provide a woman focused savings program, a No Interest Scheme for household items like fridges and (the one which kept me from losing my job and becoming homeless) the Step Up Loan for up to $3000AU (I bought a car = keep job = keep up with rent).

  12. Xletricity says:

    Just a quick question before taking all the advice from this video: how does the advice relate to being in a country outside the US?

  13. Isilzha Mir says:

    I would love to see a video about what things go into your credit score. Even as a loan officer, I don't completely understand it.

  14. Philip Hawkins says:

    I don’t know if these are common in US but in UK a lot of credit card companies offer 0% interest deals where you won’t be charged any interest for the first one or two years.

  15. xmorgan1123x says:

    Regarding community college, if you want to do your first 2 years at a community college then transfer to a 4 year university, be aware that it really depends on your major and which school you're transferring to as to whether your credits will transfer. If you're doing, say, a business degree, you'll most likely be fine. But I'm an education major and nearly everyone who transfers into the program at my university has to basically restart from the level of a freshman. This is because different schools have different criteria for which classes education majors have to take, so my university takes no chances with transferring credits. Combine that with the crapton of classes that are required, and you get transfer students who end up spending 3 or 3.5 years here instead of the 2 that they planned.

  16. Hamil Patel says:

    scariest video yet. but helpful.

  17. Llamacorn10 says:

    Student loans 😭😭😭

  18. Laura Some Number says:

    A home should not be an investment. It fucks over the next generation.

  19. ordinary Oddball says:

    If you are in Canada, please visit Canadian Credit Counselling Society, they are a fantastic free ally for debt, credit, budgeting, any financial how-to-adult things you need to learn.

  20. jnzkngs says:

    People forget that there's a lot of homework to do BEFORE deciding on college majors. A friend of mine paid her own way through marine biology school by bar tending at Apple Bee's, only to find out after the fact that marine biologists make less money than bar tenders at Apple Bee's. 🙁

  21. Brittany Always says:

    I sincerely hope that people are paying attention, especially regarding student loans. I had no clue what I was doing as a first-generation college student. Now working at a university, I see how students are taking whatever they are given- which is way more than needed usually, and it's just digging a huge hole.

  22. Youri's leergedoe says:

    Here is weird one: how to follow the news.
    As I get older, I get alot more interested in the news and in world issues. But everytime I try to follow the news I get overwhelmed with the amount of information that is out there. I think it's important to teach young adults where to find good news sources, how to follow stories , how to indentify if a news article is a well written article and to analyse how "true" a story actually is (don't believe everything you read on the internet). Hopefully you like this idea. 🙂
    (Srry 4 bad english)

  23. Shivam Bhatyar says:

    Basically, most of the cons are fuck ups on the borrower's part.

  24. Apollomuscles says:

    Im curious as to why you just don’t save up before buying shit instead of taking a loan

  25. Blue Jelly says:

    Is it possible if you spend wisely to eventually become free of debt? I know house and car payments exist as well as student loan, but once you clear those out can you technically have zero dollars in debt?

  26. Save Money Tricks says:

    This is a very helpful video. Staying out of debt is so much better than thinking of how to pay it and when to pay it. I created my channel to share videos on saving money tricks. Believe me when I say that I've never been this happy after being free from debt. We can all do it.

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