Effective Borrowing and Debt Management: A Comprehensive Guide, Slides of Fundamentals of E-Commerce

Download Effective Borrowing and Debt Management: A Comprehensive Guide and more Slides Fundamentals of E-Commerce in PDF only on Docsity! Know How to Borrow • Maintain a strong credit rating • Reduce the lender’s risk – use a variable rate loan. – keep the loan term as short as possible. – provide collateral for the loan. – pay a large down payment on the item to be purchased with financing. Docsity.com Know When to Borrow • Do you really need to make this purchase? • Does it fit into your financial plan? • If cash is used, can you maintain sufficient liquidity? • What is the after-tax cost of borrowing versus the after-tax lost return from using savings to make the purchase? Docsity.com Take Steps When You Can’t Pay Your Bills (cont’d) • Consider a cheaper loan to pay back more expensive debt. • Use savings to pay off current debt. • Consider a debt consolidation loan. Docsity.com Chapter 13: The Wage Earner’s Plan • Is a viable possibility if you – have a regular source of income – have less than $350,000 secured debt – have less than $100,000 unsecured debt • Sets-up a controlled repayment schedule • Allows you to maintain possession of your assets • Is reported on your credit report for 7 years Docsity.com Chapter 11: Debt Reorganization • Not very common because it is intended for businesses. • Is viable if you exceed the liability limits of Chapter 13. • Allows your creditors to vote on the repayment plan. Docsity.com Summary (cont’d) • Installment loans – Repayment of both principal and interest occur at regular intervals. • Fixed-rate interest versus variable-rate – Fixed-rate loans normally have a higher interest rate that remains constant throughout the loan. – Variable-rate loans have an interest rate based on an index, such as the prime rate or the 6-month treasury bill rate. Docsity.com Summary (cont’d) • Loan costs vary with the methods of computing finance charges • Sources of consumer loans—know the costs • Four ways to reduce your interest rate – use a variable-rate loan – keep loan term short – provide collateral – make a large down payment Docsity.com Summary (cont’d) • Determine how much debt you can afford – review your budget – analyze debt commitments – calculate your financial ratios – apply the debt resolution rule • Seek help if you get into trouble Docsity.com