Your Debt

**Rick** · 06-03-2008, 08:15 PM

There is a really good article in this month's (July, 2008) Consumer Reports on rules for borrowing. Some of you may know these, some may not.

20% - Your car payment, credit cards and other non-mortgage debt should be less than 20% of your gross monthly income.

28% - Your monthly mortgage payment (including property taxes and insurance. Often referred to as escrow) should not exceed 28% of your gross monthly income.

36% - 48% - You total monthly debt payments should not exceed 36% of your gross monthly income. But never above 48%.

80% - The total amount borrowed on your first mortgage, plus any second mortgage or home-equity credit line should not be more than 80% of the property's value. The lower this debt-to-equity ratio, the better.

6 Months - You should have enough money to cover six months of living expenses in an accessible account for emergencies. Don't use credit lines as a substitute.

36 Months - Don't take out an auto loan that exceeds three years. Longer-termed loans can leave you upside down with a loan balance that is larger than the car's depreciated value.

650-700 points - You are generally considered a sub-prime borrower if your FICO credit score is below 600 for auto loans and mortgages and below 700 for premium credit cards and 650 for classic cards. If your credit score falls below those thresholds, you'll pay higher interest reates.

By the way, you are entitled to one free credit report from each of the big four credit companies. You'll have to purchase your credit score but the report is free. Studies suggest that as many as 80% of the credit reports have errors bad enough to deny you credit so it's important to check each of the reports at least once a year.

**wareagle69** · 06-03-2008, 08:21 PM

ooops......

**Rick** · 06-03-2008, 08:24 PM

For some reason I thought that might be the comment of a lot of readers.

**crashdive123** · 06-03-2008, 08:25 PM

Originally Posted by wareagle69

ooops......

-

**Ken** · 06-03-2008, 08:28 PM

Originally Posted by Rick

For some reason I thought that might be the comment of a lot of readers.

There you go. Thinking. Didn't I warn you that you could hurt yourself doing that? Just leave the thinking to us rank and file members and you'll be much safer.

**Ken** · 06-03-2008, 08:32 PM

BTW - NO mortgage. NO cars loans, ever in my life - what is a car loan, anyway? If I could only afford a $500 clunker, well, that's what I drove. Credit Cards? Collect a wallet full if you want, but don't use 'em. Try DEBIT cards - they do the same thing in a much safer way.

**Teotwawki** · 06-03-2008, 08:40 PM

Gotta to say I disagree with that article.

Below is what I consider better wisdom regarding debt:

Beware of little expenses. A small leak will sink a great ship.

Creditors have better memories than debtors.

If you know how to spend less than you get, you have the philosopher's stone.

Many a man thinks he is buying pleasure, when he is really selling himself to it.

Rather go to bed with out dinner than to rise in debt.

-- Benjamin Franklin

Debt, n. An ingenious substitute for the chain and whip of the slavedriver.
--- Ambrose Bierce

You load 16 tons, and what do you get?
Another day older and deeper in debt.
St. Peter don't you call me 'cause I can't go.
I owe my soul to the company store.
--- Tennessee Ernie Ford

If you are in debt you are a slave. - Me

Like Ken, I am a slave to no one. Middle Aged: Zero Debt.

**Rick** · 06-03-2008, 08:44 PM

Merle Travis? How 'bout Tennessee Ernie Ford?

**Alpine_Sapper** · 06-03-2008, 09:06 PM

Thanks Rick. The percentage breakdown of what's recommended is very appreciated. I've been looking for that recently and hadn't found one I really agree with.

**Ridge Wolf** · 06-04-2008, 12:39 AM

Originally Posted by Teotwawki

Gotta to say I disagree with that article.

Below is what I consider better wisdom regarding debt:

Beware of little expenses. A small leak will sink a great ship.

Creditors have better memories than debtors.

If you know how to spend less than you get, you have the philosopher's stone.

Many a man thinks he is buying pleasure, when he is really selling himself to it.

Rather go to bed with out dinner than to rise in debt.

-- Benjamin Franklin

Debt, n. An ingenious substitute for the chain and whip of the slavedriver.
--- Ambrose Bierce

You load 16 tons, and what do you get?
Another day older and deeper in debt.
St. Peter don't you call me 'cause I can't go.
I owe my soul to the company store.
--- Tennessee Ernie Ford

If you are in debt you are a slave. - Me

Like Ken, I am a slave to no one. Middle Aged: Zero Debt.

Lucky you.. try paying those percentages while unemployed.

I said it here: http://www.wilderness-survival.net/f...ured+servitude and I'll say it again. Being in debt is the modern form of indentured servitude. Indentured servitude is illegal in the U.S.

**dilligaf2u2** · 06-04-2008, 06:28 PM

Credit?? Never heard of it!

I have no payments out of my check. TDW has a car and the house. I have a debit card for emergencys. with $500 in the account.

I prepay or use cash. If TDW goes under it dose not affect me and we can still survive.

Don

**Ole WV Coot** · 06-04-2008, 11:08 PM

Don't have any, don't expect or want any. Really have everything we need. We have been blessed but that could change so I can't say anything about people who owe their soul.

**BraggSurvivor** · 06-04-2008, 11:37 PM

I only use credit. I use credit cards for everything. I use one for business and one for personal. I never carry cash. At years end after all taxes are paid, I purchase real-estate locally or abroad. If there is money left I purchase physical silver and gold, right down to the last red cent. I keep all personal and business assets separate. I use a line of credit against revenue properties I own to run my businesses. All personal income runs through a registered Family Trust account paid for through my companies. (all family members draw a wage).

I never pay interest on lines of credit/credit cards or banking fees.