{"id":18,"date":"2016-08-19T16:14:37","date_gmt":"2016-08-19T16:14:37","guid":{"rendered":"http:\/\/stories.kera.org\/debt\/?p=18"},"modified":"2018-08-07T18:13:42","modified_gmt":"2018-08-07T18:13:42","slug":"what-you-need-to-know-about-debt-loans-and-how-to-manage-both","status":"publish","type":"post","link":"https:\/\/stories.kera.org\/debt\/2016\/08\/19\/what-you-need-to-know-about-debt-loans-and-how-to-manage-both\/","title":{"rendered":"What You Should Know About Debt, Loans And How To Manage It All"},"content":{"rendered":"<p><em>There are so many kinds of debt. Learn more about the major types, how to calculate your credit score, definitions on the variety of\u00a0loans, links to local resources for debt relief and more.<br \/>\n<\/em><\/p>\n<hr \/>\n<p><strong>Debt is a burden most Americans carry<\/strong>. Make that approximately 122 million U.S. households. That&#8217;s as of 2013, according to the U.S. Census Bureau. Debt\u00a0can take\u00a0many forms \u2014 consumer, medical and academic \u2014 often plaguing the financial health of individuals and families. Sometimes it takes just one incident to take a dive into debt: things like an emergency surgery, a tuition increase or a salary cut.<\/p>\n<p><strong>Debt has grown over the last decade<\/strong>. The rise in the cost of living has outpaced income growth over the past 12 years, according to a\u00a0<a href=\"https:\/\/www.nerdwallet.com\/blog\/credit-card-data\/average-credit-card-debt-household\/\" target=\"_blank\" rel=\"noopener\">2015 study from NerdWallet<\/a>. &#8220;While median household income has grown 26 percent since 2003, household expenses have outpaced it significantly \u2014 with medical costs growing by 51 percent and food and beverage prices increasing by 37 percent in that same span.&#8221;<\/p>\n<p><strong>Debt has a stigma<\/strong>. Consumers underestimate or under-report how much debt they have. Actual <a class=\"bluelink\" href=\"https:\/\/www.newyorkfed.org\/microeconomics\/data.html\" target=\"_blank\" rel=\"noopener\">lender-reported credit card debt<\/a> was 155 percent greater than borrower-reported balances as of 2013, NerdWallet reported.<\/p>\n<p>The total debt of any kind owed by the average American household is <strong>$132,086<\/strong>. Here&#8217;s a <a href=\"https:\/\/www.nerdwallet.com\/blog\/credit-card-data\/average-credit-card-debt-household\/\" target=\"_blank\" rel=\"noopener\">breakdown of the debts<\/a> owed by the average American household as of the first quarter of 2016:<\/p>\n<p><script id=\"infogram_0_d6391d79-e2a3-465c-b199-a7db307a4542\" title=\"U.S. Debt As of Q1 2016\" src=\"\/\/e.infogr.am\/js\/embed.js?dqC\" type=\"text\/javascript\"><\/script><\/p>\n<h5>CONSUMER DEBT AND CREDIT CARDS<\/h5>\n<p>Consumer debt is defined as a debt incurred by an individual for primarily personal, family, or household purposes. American consumers use credit cards to buy life&#8217;s essentials: food, clothing, housing and transportation.\u00a0As of 2014, there were <strong>603 million<\/strong> U.S. credit cards in circulation, according to <a href=\"https:\/\/www.debt.org\/credit\/\" target=\"_blank\" rel=\"noopener\">Debt.org<\/a>.<\/p>\n<p>When the economy is in flux, one thing is constant: <a href=\"http:\/\/time.com\/money\/4213757\/average-american-credit-card-debt\/\" target=\"_blank\" rel=\"noopener\">spending<\/a>. NerdWallet reports the average household has\u00a0<strong>$15,310<\/strong>\u00a0on credit cards.<\/p>\n<h6>HOW TEXAS COMPARES WITH THE U.S.<\/h6>\n<p>Texans have less debt than most other Americans, carrying about <strong>$13,500 less than the national average<\/strong>, according to <a href=\"https:\/\/www.debt.org\/faqs\/americans-in-debt\/consumer-texas\/\" target=\"_blank\" rel=\"noopener\">Debt.org<\/a>.\u00a0Texans have less credit card debt, education loans and other personal debts than the rest of the country, and they\u00a0have\u00a0managed to cut their bankruptcy rate in half over the past few years.<\/p>\n<p>The downside: Texans have some of the lowest credit scores in the country,\u00a0a result of falling behind on bills and making late payments, Debt.org reported.<\/p>\n<p>Of\u00a0top 25 largest metros in the U.S., Houston (No. 21), Dallas-Fort Worth (No. 24) and San Antonio (No. 25) all ranked as cities with large credit card burdens in a study from <a href=\"http:\/\/www.creditcards.com\/credit-card-news\/debt-payoff-cities.php\" target=\"_blank\" rel=\"noopener\">CreditCards.com<\/a>. The study determined the rankings by how long it takes residents to pay back their credit card statements.<\/p>\n<p><script id=\"infogram_0_6751eb9d-5bc3-4220-b466-e8a815c393a1\" title=\"Credit Burdens In Texas\" src=\"\/\/e.infogr.am\/js\/embed.js?Eaw\" type=\"text\/javascript\"><\/script><\/p>\n<h6>About FICO Scores<\/h6>\n<p>Credit scores are an assessment of your credit history and how well you handle money. Lenders use them to determine interest rates and credit limits.<\/p>\n<p>The average FICO score in the U.S. is 680. An ideal score is <strong>720 or above<\/strong>. <a href=\"http:\/\/www.myfico.com\/ficocreditscoreestimator\/estimator.aspx\" target=\"_blank\" rel=\"noopener\">Calculate your score<\/a>.<\/p>\n<h6>A FICO score accounts for five main things:<\/h6>\n<ol>\n<li>Have you paid your credit accounts on time?<\/li>\n<li>Do you owe money on your credit cards?<\/li>\n<li>How long have you used credit cards?<\/li>\n<li>How many credit accounts have you opened? In what time frame?<\/li>\n<li>What does your mix of credit cards, retail accounts and mortgage loans look like?<\/li>\n<\/ol>\n<p>Each category has a different weight of importance, and some might not apply directly to everyone.<\/p>\n<p><script id=\"infogram_0_53f3a25d-d684-4a01-8937-0709cecb4362\" title=\"What Determines Your Credit Score\" src=\"\/\/e.infogr.am\/js\/embed.js?gdw\" type=\"text\/javascript\"><\/script><\/p>\n<h5>MEDICAL DEBT AND THE COST OF HEALTH CARE<\/h5>\n<p>The United States is an expensive place to get sick. Americans pay three times more in third-party collections of medical debt each year than they pay for bank and credit card debt combined, according to <a href=\"https:\/\/www.nerdwallet.com\/blog\/health\/managing-medical-bills\/medical-bills-debt-crisis\/\" target=\"_blank\" rel=\"noopener\">NerdWallet<\/a>.<\/p>\n<p>About a quarter of U.S. adults under\u00a065 say they or someone in their household had problems paying or an inability to pay medical bills, according to a <a href=\"http:\/\/kff.org\/report-section\/the-burden-of-medical-debt-section-1-who-has-medical-bill-problems-and-what-are-the-contributing-factors\/\">study from The New York Times and Kaiser Family Foundation<\/a>. To compare, <strong>53 percent<\/strong> of people without insurance said the same.<\/p>\n<p>According to the study, twice as many people (66 percent) say their debt was a result of a one-time or short-term medical expense than people with bills building over the course of a chronic or long-term illness (33 percent).<\/p>\n<p><script id=\"infogram_0_82ad664a-bf85-4599-991e-ffc0b2c39d36\" title=\"\" src=\"\/\/e.infogr.am\/js\/embed.js?qtP\" type=\"text\/javascript\"><\/script><\/p>\n<h5>ACADEMIC DEBT AND STUDENT LOANS<\/h5>\n<p>People who attend college are likely to make twice as much money as those who do not, according to the\u00a0<a href=\"http:\/\/comptroller.texas.gov\/specialrpt\/student_loan\/?_ga=1.55074665.359535420.1469811434\" target=\"_blank\" rel=\"noopener\">Texas comptroller&#8217;s office<\/a>. A\u00a0college education typically gives students the financial power to live independently and to eventually buy homes and cars and start a family. Student loan debt is delaying many these post-graduate milestones.<\/p>\n<p>The growth in student loan debt follows\u00a0the growth in the cost of attending college.\u00a0In Texas, average in-state public university tuition and fees rose by <strong>90 percent<\/strong> between 2003 and 2012.<\/p>\n<p>The average 2012 Texas student loan debt was <strong>$22,800<\/strong>, about 8 percent below the U.S. average at that time, according to the state comptroller&#8217;s office.<\/p>\n<p>In 2014, the average U.S. student debt for a recent\u00a0graduate was <strong>$33,000<\/strong>, according to <a href=\"https:\/\/www.debt.org\/students\/\">Debt.org<\/a>. A year later, <a href=\"http:\/\/blogs.wsj.com\/economics\/2015\/05\/08\/congratulations-class-of-2015-youre-the-most-indebted-ever-for-now\/\" target=\"_blank\" rel=\"noopener\">The Wall Street Journal<\/a> reported the average class of 2015 graduate would owe a little more than <strong>$35,000<\/strong>.<\/p>\n<p>Almost <strong>71 percent<\/strong> of bachelor\u2019s degree recipients will graduate with a student loan, compared with about 64 percent a decade ago and less than 50 percent two decades ago, according to the Journal.<\/p>\n<p>The average cost of a public four-year university in the U.S. for the 2015-2016 school year was <strong>$9,410<\/strong> and for a private, four-year university: <strong>$32,405<\/strong>, according to <a href=\"https:\/\/trends.collegeboard.org\/college-pricing\/figures-tables\/tuition-and-fees-and-room-and-board-over-time-1975-76-2015-16-selected-years\" target=\"_blank\" rel=\"noopener\">CollegeBoard<\/a>.<\/p>\n<h6>What you might earn in your first year after graduation<\/h6>\n<p>Austin-based nonprofit TG built a\u00a0tool that calculates what your income\/employment rate will likely be by school and by major. <a href=\"https:\/\/www.aie.org\/pay-for-college\/understand-college-costs\/major-choices\/\" target=\"_blank\" rel=\"noopener\">Use the tool on TG&#8217;s website<\/a>.<\/p>\n<p>It also predicts your student loan repayment by the same criteria. It includes every school in Texas that\u2019s public or for profit. You can compare the same major at two different schools OR three different majors at the same school.<\/p>\n<p><span style=\"font-family: Arial, sans-serif; font-size: 19px; font-weight: bold;\">Types of Loans<\/span><\/p>\n<p>Toggle the plus signs to read the full definition of each type of loan, according to <a href=\"https:\/\/www.debt.org\/credit\/loans\/\">Debt.org<\/a>.<\/p>\n<div class=\"one_half\"><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Student Loans<\/span><div class=\"toggle-inner\"> Student loans help cover the cost of higher education. There are two main types of student loans: federal and private. Federal loans usually come with lower interest rates and friendlier\u00a0repayment terms.<\/div><\/div><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Mortgages<\/span><div class=\"toggle-inner\">Mortgages are loans given\u00a0by banks to allow consumers to buy homes. If you fall behind on payments, you risk foreclosure of your home. Mortgages have among the lowest interest rates of all loans.<\/div><\/div><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Auto Loans<\/span><div class=\"toggle-inner\"> Auto loans can help you afford a vehicle, but, like mortgages, you risk losing the property\u00a0if you miss payments. A bank or the car dealership can distribute these loans directly. While loans from the dealership may be more convenient, they often carry higher interest rates and cost more overall.<\/div><\/div><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Personal Loans<\/span><div class=\"toggle-inner\">\u00a0These can be used for any personal expenses, which makes them an attractive option for people with outstanding debts, who want to reduce their interest rates by transferring balances. Like other loans, personal loan terms depend on your credit history.<\/div><\/div><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Loans for Veterans<\/span><div class=\"toggle-inner\"> The Department of Veterans Affairs has lending programs available to veterans and their families. The VA acts as a co-signer and effectively vouches for you, helping you earn higher loan amounts with lower interest rates.<\/div><\/div><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Small Business Loans<\/span><div class=\"toggle-inner\">\u00a0Small business loans are granted to entrepreneurs\u00a0to help them start or expand a business. The best source of small business loans is the U.S. Small Business Administration.<\/div><\/div><\/p>\n<p><\/div>\n<div class=\"one_half last\"><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Payday Loans<\/span><div class=\"toggle-inner\"> These\u00a0are short-term, high-interest loans designed to help repeat borrowers living paycheck to paycheck. The government strongly discourages consumers from taking out payday loans because of their high costs and interest rates.<\/div><\/div><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Using Retirement &amp; Life Insurance<\/span><div class=\"toggle-inner\"> People with\u00a0retirement funds or life insurance plans may be eligible to borrow from their accounts. It&#8217;s essentially borrowing from yourself. But, in some cases, failing to repay such a loan can result in severe tax consequences.<\/div><\/div><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Consolidated Loans<\/span><div class=\"toggle-inner\"> Consolidated loans, typically in the form of second mortgages or personal loans, pay off all or several of your outstanding debts, particularly credit card debt. It means fewer monthly payments and lower interest rates.<\/div><\/div><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Borrowing from Friends and Family<\/span><div class=\"toggle-inner\">\u00a0As an informal type of loan, borrowing from friends or family\u00a0isn\u2019t always a good option. It\u2019s a good idea to sign a basic promissory note to protect both parties.<\/div><\/div><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Cash Advances<\/span><div class=\"toggle-inner\">\u00a0This is a\u00a0short-term loan against your credit card. Instead of using the credit card to make a purchase or pay for a service, you bring it to a bank or ATM and receive cash to be used for whatever purpose you need. Cash advances also are available by writing a check to payday lenders.<\/div><\/div><\/p>\n<p><div data-id='closed' class=\"toggle\"><span class=\"toggle-title\">Home Equity Loans<\/span><div class=\"toggle-inner\">\u00a0Home equity loans and home equity lines of credit (HELOCs) use the borrower\u2019s home as a source of collateral.\u00a0A home equity loan has a fixed interest rate and regular monthly payments are expected. A\u00a0HELOC has variable rates and offers a flexible payment schedule. Home equity loans and HELOCs are used for things like home renovations, credit card debt consolidation, <a href=\"https:\/\/www.debt.org\/medical\/collections\/\">major medical bills<\/a>, education expenses and retirement income supplements. They must be repaid in full if the home is sold.<\/div><\/div><\/p>\n<p><\/div><div class=\"clearboth\"><\/div>\n<h5>Resources For Tackling Debt<\/h5>\n<div class=\"bullets tick black\"><\/p>\n<ul>\n<li><a href=\"https:\/\/www.gottabemobile.com\/2016\/06\/09\/best-budget-apps\/\" target=\"_blank\" rel=\"noopener\">11 Best Budget Apps<\/a><\/li>\n<li><a href=\"https:\/\/www.consumer.ftc.gov\/articles\/0150-coping-debt#self-help\" target=\"_blank\" rel=\"noopener\">Managing Auto and Home Loans<\/a><\/li>\n<li><a href=\"http:\/\/www.studentloanhelp.org\/\" target=\"_blank\" rel=\"noopener\">Student Loan Counseling<\/a><\/li>\n<li><a href=\"http:\/\/www.consumerreports.org\/student-loan-debt-crisis\/having-the-college-money-talk\/\" target=\"_blank\" rel=\"noopener\">Having the College Money Talk<\/a><\/li>\n<li><a href=\"https:\/\/bigfuture.collegeboard.org\/pay-for-college\/college-costs\/college-costs-calculator\" target=\"_blank\" rel=\"noopener\">College Cost Caculator<\/a><\/li>\n<li><a href=\"https:\/\/www.debt.org\/students\/how-to-pay-back-loans\/\" target=\"_blank\" rel=\"noopener\">How To Pay Back Loans<\/a><\/li>\n<li><a href=\"https:\/\/www.usa.gov\/debt\" target=\"_blank\" rel=\"noopener\">Types of Bankruptcy<\/a><\/li>\n<li><a href=\"https:\/\/www.thebalance.com\/tactics-to-deal-with-medical-debt-960859\" target=\"_blank\" rel=\"noopener\">Tactics to Deal with Unpaid Medical Debt<\/a><\/li>\n<li><a href=\"http:\/\/www.tdi.texas.gov\/consumer\/cpmbalancebilling.html\" target=\"_blank\" rel=\"noopener\">How to deal with surprise medical bills<\/a><\/li>\n<li><a href=\"https:\/\/www.nerdwallet.com\/blog\/credit-card-debt\/\" target=\"_blank\" rel=\"noopener\">Getting Out of Credit Card Debt<\/a><\/li>\n<li><a href=\"http:\/\/www.txdebtconsolidation.com\/counseling\/credit-counseling-fort-worth-tx\/\" target=\"_blank\" rel=\"noopener\">Credit counseling<\/a> and\u00a0<a href=\"http:\/\/www.txdebtconsolidation.com\/consolidation\/debt-consolidation-fort-worth-tx\/\" target=\"_blank\" rel=\"noopener\">debt consolidation<\/a>\u00a0in Fort Worth<\/li>\n<li><a href=\"http:\/\/www.txdebtconsolidation.com\/counseling\/credit-counseling-dallas-tx\/\" target=\"_blank\" rel=\"noopener\">Credit counseling<\/a>\u00a0and <a href=\"http:\/\/www.txdebtconsolidation.com\/consolidation\/debt-consolidation-dallas-tx\/\" target=\"_blank\" rel=\"noopener\">debt consolidation<\/a> in Dallas<\/li>\n<li><a href=\"http:\/\/www.txdebtconsolidation.com\/counseling\/credit-counseling-denton-tx\/\" target=\"_blank\" rel=\"noopener\">Credit counseling<\/a> and <a href=\"http:\/\/www.txdebtconsolidation.com\/\" target=\"_blank\" rel=\"noopener\">debt consolidation<\/a> in Denton<\/li>\n<li><a href=\"https:\/\/www.reviews.com\/debt-consolidation-loans\/\" target=\"_blank\" rel=\"noopener\">Compare debt consolidation services<\/a><\/li>\n<\/ul>\n<p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>There are so many kinds of debt. Learn more about&#8230;<\/p>\n","protected":false},"author":7,"featured_media":141,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-18","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-one-crisis-away-drowning-in-debt","byline-molly-evans"],"_links":{"self":[{"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/posts\/18","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/comments?post=18"}],"version-history":[{"count":130,"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/posts\/18\/revisions"}],"predecessor-version":[{"id":420,"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/posts\/18\/revisions\/420"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/media\/141"}],"wp:attachment":[{"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/media?parent=18"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/categories?post=18"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stories.kera.org\/debt\/wp-json\/wp\/v2\/tags?post=18"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}