Get Real and Get Out of Debt - Student Loans, Credit Card Debt & National Debt Videos

(April 15th, 2007)

Now i want to define "DEBT" for you. Debt is when you owe INTEREST to a lender, as simple as that. Now for you my friends who are first time home buyers thinking "Oh Boy, its an asset!", it is really a form of debt! Why? That's because you owe interest on this house! And the interest that you owe is for 360 months, or 30 years. Some of us finance our houses with 0% down, but what you really want to put down is 20%! For some of us in Silicon Valley, it's impossible! With townhouses and condos selling for $700,000 it really is hard. Remember again, when you buy your house for the first time, it is NOT an asset! It is a debt! It is a liability because you owe the lender, an Interest. Whatever that interest is, you might be lucky to get a 6% mortgage interest while others may not be so lucky because they may have got 9% mortgage interest rate.


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Video Review

Afro Video Host says: Welcome to the Afro Mega Seminar Series Online. Today what we're going to be talking about is, Get Real and Get out of Debt. Many of us worry about our FICO score and we believe that having a FICO score can lead to good credit. As a matter of fact, a good FICO score CAN lead to good credit. But here's the thing; many of us shop till we drop. In other words, we use our credit cards and charge huge amounts of debt on them, with interest at 23% and up! I mean 15% is very bad and 9% is still bad. So having debt, is NOT really the way you want to go. Let me tell you one thing about debt:

I know many couples who have been married for less than 6 months breaking up because of credit card debt. If you charge $8000 on your credit card, it could literally take you 30 years to pay it off!! And a lot of people have a misconception about what assets are. Some people think that a car is an asset. Especially us the Afro community, we will quickly get inside a Chrysler 300 or a Mercedes and install $10,000 rims on it. Now let me tell you, in 5-10 years, that car is going to lose a tremendous value, I'm talking about almost 80% of the money you put on the car. You'd probably put down $10,000 - $15000 down payment on a Mercedes, especially if you have a FICO score of less than 650. Although the Mercedes costs only $50,000, you'd probably end up paying a total of $75000 with interest included! And especially if you have bad credit, you could see a rate of 15%!

You go figure, the money you've just put down, the $15000 will be lost. I remember getting my first car, it was a BMW 7 series. I was paying $650 a month payment on the car, after putting an initial $20,000 on the car! By the way, that same BMW 7 series i bought 8 years ago, sells for $8000 today! And i ended up paying twice on the car (the initial $20,000 down payment), because i financed at a rate of 22%! I went broke! A car is NOT an asset folks!

Now i want to define "DEBT" for you. Debt is when you owe INTEREST to a lender, as simple as that. Now for you my friends who are first time home buyers thinking "Oh Boy, its an asset!", it is really a form of debt! Why? That's because you owe interest on this house! And the interest that you owe is for 360 months, or 30 years. Some of us finance our houses with 0% down, but what you really want to put down is 20%! For some of us in Silicon Valley, it's impossible! With townhouses and condos selling for $700,000 it really is hard. Remember again, when you buy your house for the first time, it is NOT an asset! It is a debt! It is a liability because you owe the lender, an Interest. Whatever that interest is, you might be lucky to get a 6% mortgage interest while others may not be so lucky because they may have got 9% mortgage interest rate.

So again, it's great to be a homeowner because you are not renting, and eventually you will built up some equity in your house. But then again, who'd want to wait for 30 years to own their house, especially if you started late? For example, a 40 year old person would not be motivated to own his house in 30 years, when he'll be 70 years old! That's only going to be an asset for the relatives that come after you, meaning the inheritors of your wealth, UNLESS you get on this new system.

What New System?

The new system is, paying off debt with the highest interest rate, as soon as you possibly can! Read our section on Do It Yourself Debt Reduction or the 10 Crucial Debt Reduction Mistakes. For example, say you purchase a $500,000 house and put down 20% on it, which is about $100,000. Also, say your monthly mortgage payments are $2000 a month. Now if you apply what's called a 10% Margin Rate or a 10% Mortgage Accelerator to pay off that debt and say your annual income is $50,000 - $60,000 a year, you could end up fully paying off that house in 7 years! I'm not lying to you folks, you really could own that house in 7 years! Now when you OWN that house, that's considered an ASSET!

Hey another scenario you should consider. Say you have $8000 in credit card debt, and you think its "ONLY" $8000, no big deal! Let me tell you this, if you keep that $8000 credit card debt for 30 years and make only the minimum monthly payments and minimum interest, you will end up paying $30,000 for that $8000 debt! That's a loss of $22,000 over the life of 30 years!

Comments


Annabelle Comments on August 9th, 2007

I would really like to get out of debt its streesing me so much.I feel hopeless. I have a truck payment,rent, utilities bills, a loan, and credits cards, Right now i have a negative $900.00 at my bank were my checks bounce. I dont know how im going to pay all this back. Im always broke and I cant get out of this, I feel that im never going to get out of this debt.I need some advice on what to do?

~StockTrader~ Comments on April 16th, 2007

I would've liked it if he would explain more about the 10% Margin or accelerator thing... If you make 50k a year and put 10% margin, that means you pay $10,000 more towards your house every year? Can someone clarify this for me please?