At some point in your life, you will need to borrow money. Understanding how debt works is an important part of using it effectively.
The costs associated with consumer debt are reflected in the interest charges. Credit cards have higher interest rates, sometimes nearly 20%. Home Mortgages usually charge around 6%. These rates are dependent on a number of factors.
Factors Affecting Borrowing:
- Amount borrowed
- Type of loan
- Income of borrower
- Current Economic Environment
- Borrower's Credit Rating
- Other Factors
The Utility Deposit Assistance Program (UDAP) acts as a guarantor to local utility companies. Students have been known to move out of an apartment and not receive their final bill. When a final bill arrives at the apartment, it isn't forwarded to their new address and the student never finds out about the unpaid bill.
Unpaid bills negatively affect your credit rating.
"Most Americans would be surprised to learn that total consumer debt, including home mortgages (over $6.5 trillion), exceeds the cumulative U.S. national debt ($5.7) trillion. "
-The Motley Fool*
* Source: Shocking Credit Card Facts, Selena Maranjian, The Motley Fool, September 30, 2004.
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Good credit is a vital financial tool for getting established at graduation. Most students will need to borrow for one reason or another, whether it is to buy a home or a car. Paying for the the protection of UDAP could save you thousands down the road in the form of lower interest rates.
Having a good credit score is also a tool in getting a job. Believe it or not, a credit score is a simple and cheap way to investigate someone's background. Having poor credit shows an inability to take care of basic responsibilities such as paying your bills. What employer is going to hire someone that is not responsible with simple tasks?
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