Do you owe more than $26k, not including a mortgage?

[Lazybones]

As Thorin stated it is more about your ability to pay.


You should watche Maxed Out it should still be on Netflix.
http://m.imdb.com/title/tt0762117/

[Tom]

As Thorin stated it is more about your ability to pay.

I just assumed that since I missed a crap load of payments (ever since it came due after going to CDI way back when, up till a few years ago, when I started paying $20/mo), it would look really bad.

You should watche Maxed Out it should still be on Netflix.
http://m.imdb.com/title/tt0762117/

Hmm. I'll watch that.

[Thorin]

Student loans have special rules where if you can show hardship the government will pay the interest for you, six months at a time, for up to five years.  If you can still show hardship after that time, they'll start paying down the principal for you as well.  Being on AISH as your only income is definitely considered hardship.  Do you remember filling out any kind of assistance papers for your student loan before it came due?  It could be that an AISH caseworker did it for you, as well.  If so, then it doesn't affect your credit because the bank is still getting their interest on your loan.

I had a friend who went through five years of not paying his student loan, although much of his hardship was self-imposed and to be honest he was working for a livable wage so could have made payments if he'd prioritized them.  Unfortunately he did things like pay double the minimum payment one month then nothing the next, thinking that they would just split the payment from one month into two months.  So his record showed a lot of missed payments, and his credit rating went sour.

[Tom]

Student loans have special rules where if you can show hardship the government will pay the interest for you, six months at a time, for up to five years.  If you can still show hardship after that time, they'll start paying down the principal for you as well.  Being on AISH as your only income is definitely considered hardship.  Do you remember filling out any kind of assistance papers for your student loan before it came due?  It could be that an AISH caseworker did it for you, as well.  If so, then it doesn't affect your credit because the bank is still getting their interest on your loan.

I had a friend who went through five years of not paying his student loan, although much of his hardship was self-imposed and to be honest he was working for a livable wage so could have made payments if he'd prioritized them.  Unfortunately he did things like pay double the minimum payment one month then nothing the next, thinking that they would just split the payment from one month into two months.  So his record showed a lot of missed payments, and his credit rating went sour.

I know I talked to a lady at a collection agency, and worked out a minimum payment deal, even though it was less than the interest. That was several years ago, and I didn't always manage to make the payments.. Then the Govt took back control of the loans (stopped farming out the collections), and I never heard about the loan again, except for the monthly statements. I didn't get the loan direct from a bank, but rather through the canada student loans thing (with "Human Resources and Skills Development Canada", or at least thats where the statements are coming from).

[Thorin]

Now that you make money, you'll have to figure out how much interest you're paying on that student loan, as you can use it as a tax deduction.

[Tom]

Now that you make money, you'll have to figure out how much interest you're paying on that student loan, as you can use it as a tax deduction.

From what I remember, its very little. Just looked at Nov's and it says $40.

[Tom]

lol. I took another look at my score, apparently its /one/ away from "Excellent". ahah. And my student loan doesn't show up on it at all. Maybe it was never submitted to equifax.

[Thorin]

Might just be your historically-low income keeping it below excellent, then.  This time next year, it might be excellent, given all the money you're making this year

TOM IS RICH!

[Tom]

Might just be your historically-low income keeping it below excellent, then.  This time next year, it might be excellent, given all the money you're making this year

TOM IS RICH!

I'm doing ok.

[Thorin]

I've been reading recently about Canadian debt-to-income ratios being over 150%.  So I thought I'd try and work out where mine sits.  Turns out there's a couple of different debt-to-income calculations.

The first one, where Canadians are averaging 150%+, is basically a calculation of how much you owe compared to how much you make.  So if you're right around the Canadian average, your total debts (including mortgage, credit cards, student loans, car loans, lines of credit, and other loans) are about 1.5 times what you make in a year.  For my family?  We owe about $300k at the moment, and are expecting to make about $90k this year, so 333% (that'll be balanced by someone young who's just entering the workforce and has no debt, and therefore is at 0%).  This gets muddled if you add in net worth - for instance our house is worth $340k, so that cancels out the $300k we owe, which would put us at 0% debt-to-income ratio when net assets are counted.

The second calculation, much more common in Google searches and the one that I thought they were referring to is how much of your monthly income is going to monthly debt payments.  Imagine if 150% of your monthly income was going to monthly debt payments!  This is a fairly straightforward calculation, too, but there's a calculator on the web for it to make things easier: http://www.consolidatedcredit.ca/credit-counselling/debt-income-ratio/.  Here, my family's monthly income is about 7.5k and bills are about 3.7k (including mortgage payments, property tax, insurance, electricity, natural gas, water, garbage removal, phone, internet, cable, gas and parking, minimum credit card payments); this works out to 49% debt-to-income ratio (aka "Financial distress is right around the corner unless you act quickly to prevent it").

Go figure, even something seemingly as simple as debt-to-income ratio is complicated.  All I can say is that I have a greater than average debt-to-income ratio at this point in my life, and that it's a good thing I don't like to go out all the time.  Also, if I took the $10k a year back from kids' sports, it'd only take three years to get rid of all other debt except my mortgage.

[Thorin]

You should watche Maxed Out it should still be on Netflix.
http://m.imdb.com/title/tt0762117/

Hmm. I'll watch that.

Apparently "Maxed Out" has a piece of the film "Wise Use Of Credit".  It's from 1960 and can be found here: http://youtu.be/9s3KMrRuHXE

(Youtube has EVERYTHING)

[Tom]

You should watche Maxed Out it should still be on Netflix.
http://m.imdb.com/title/tt0762117/

Hmm. I'll watch that.

Apparently "Maxed Out" has a piece of the film "Wise Use Of Credit".  It's from 1960 and can be found here: http://youtu.be/9s3KMrRuHXE

(Youtube has EVERYTHING)

They actually showed a fair bit of it. It's spliced in throughout the movie.

[Darren Dirt]

TWUOC has a classic line delivered completely straight-faced by Judy @ 9:45

"Gee Mr. Money, do girls have to learn all this about credit too?"

(the response: sure, the wife has to learn how to get the most out of the money her husband earns from working hard, yeesh Judy didn't you know that!?)




apparently a good "modern day equivalent", minus the sexism and cheesy acting, might be found here:

"Money As Debt"

(seems to be 45 minutes long, although there is a 75 minute version or sequel here: http://www.youtube.com/watch?v=lsmbWBpnCNk )


It talks about the entire world economy pretty much running on debt. #wearealldoomed

[Thorin]

Yeah, well, product of the 60s.  Kirk kissing Uhura caused some people to turn off their set in disgust back then.  Gee, times change.

The problem nowadays is that instead of using a reserve of gold as the basis upon which a bank can lend out money, banks can now use people's debt (such as mortgages) as the basis upon which they can lend out money.  And the ratio is 11:1.

So the bank lends me money for a mortgage, say, $100k.  It can now count me paying back that $100k as "secured capital" which it can use to loan money out 11:1.  So on the back of my mortgage that I owe them, they can lend out $1,100k.  On which they can then lend out $12,100k.  Etc.  Basically, money appears out of thin air without any tangible asset backing it all up (well, mortgages have the house as tangible asset, but imagine if this was just a cash loan; the rules are the same).  Okay, this problem only exists in the US, I'm pretty sure Canada still has the gold standard in place.  Hmm, that's something I should google.

[Darren Dirt]

Yeah, well, product of the 60s.  Kirk kissing Uhura caused some people to turn off their set in disgust back then.  Gee, times change.

The problem nowadays is that instead of using a reserve of gold as the basis upon which a bank can lend out money, banks can now use people's debt (such as mortgages) as the basis upon which they can lend out money.  And the ratio is 11:1.

So the bank lends me money for a mortgage, say, $100k.  It can now count me paying back that $100k as "secured capital" which it can use to loan money out 11:1.  So on the back of my mortgage that I owe them, they can lend out $1,100k.  On which they can then lend out $12,100k.  Etc.  Basically, money appears out of thin air without any tangible asset backing it all up (well, mortgages have the house as tangible asset, but imagine if this was just a cash loan; the rules are the same).  Okay, this problem only exists in the US, I'm pretty sure Canada still has the gold standard in place.  Hmm, that's something I should google.

Prepare to be disappointed/horrified.

Fiat Currency = pretty much the standard worldwide. Especially as the developed nations' economies move away from manufacturing industry and more towards service industry.



Clarke and Dawe explain the cause of the Global Financial Crisis very well, boiling it down to the essentials: "lending money that didn't exist".