Question for Financial Gurus....

[ashbeeigh]

Ash, since you're "just starting out", I'd recommend follwing this program.

I'm really not too worried about my debt now. Yeah, I have a lot, but it'll go down eventually. All my student loans are consolidated and I'm paying higher then the minimum on them. My credit cards are getting paid off, not the full balance, but not the minimum either.

And I'm sure I'll have a Debbie Downer come in and say I'm not right in thinking this way, but I'm not going to go out and buy a house in the near future (what else is there that has a huge impact on your FICO score?), so I'm not too worried. I don't need to buy into some guy's scheme to get my debt down.

[xrayzebra]

Finances and being an adult are the biggest pain in the ass!

Just for grins, if you are eligible to join a credit union, go
talk to the one you can join. Explain to them what you want
and see what you can work out.

Remember when you belong to a credit union, you own part
of it. A small share, but you are still part of it. Many of them
have people that can help you set up a budget and show
you how to save. Also if you pay off a loan ahead of time
you will never have to pay a penalty. This is not always
the case with commercial loans through banks or finance
companies.

One other thing, buying used cars is not wrong. I have
purchased both new and used. One thing when you buy
used you let the original owner take the write down from
the original purchase price. And at the price people pay
for new cars today they may not be in that great a shape
after 5, 6 or 7 years. So don't despair. We all have or
did go through the same learning curve that you are now
going through.

One thing I forgot to add. Next time you want to buy a car go to the lending
company, find out what the rate is and tell them how much you can afford
before you even start looking. They will tell you how much you can borrow to
stay in your budget. The loan will be pre-approved and you will have the
ease of mind of knowing how much car you can get and stay within your
budget. Also it will help when you start dealing with the dealers.

[MannyIsGod]

Better advice imo for your next car purchase: Buy in cash. Financing vehicles ftl, imo.

[Clandestino]

So you'd rather owe money to someone else in an attempt to "game the system" instead of owing nothing to anyone and paying yourself?

it's not gaming the system... it is being financially smart.

[xrayzebra]

Better advice imo for your next car purchase: Buy in cash. Financing vehicles ftl, imo.

An excellent idea. Except, most people have a hard time
paying themselves. It takes a ton of discipline to make
it work. On the other hand you must pay back to loaner
and you keep your money in hand for other uses. One
side item, don't forget you are drawing interest on the money
you have in a saving account or money market account.
Which helps to offset the interest you are paying the
loan people.

[1369]

it's not gaming the system... it is being financially smart.

There's where we disagree. I believe it is financially smart to not carry any debt and to invest with my income, not borrowed money.

If you're system works for you, who am I to say it is wrong?

[Clandestino]

There's where we disagree. I believe it is financially smart to not carry any debt and to invest with my income, not borrowed money.

If you're system works for you, who am I to say it is wrong?

I'm speaking financial sense, not what makes you feel good.

Some people do what makes them feel better emotionally vs fiscally smart.

[Anti.Hero]

Better advice imo for your next car purchase: Buy in cash. Financing vehicles ftl, imo.

I agree. It's a depreciating asset. Buy used cars you can buy in full at once (or at least pay off in 2-3 years) and move up the ladder gradually until you can easily throw down $25k+cash on something nice.


Contrary to belief (of the non-financially secure), vehicles are NOT a status symbol!

[Anti.Hero]

I'm speaking financial sense, not what makes you feel good.

Some people do what makes them feel better emotionally vs fiscally smart.

Emotional behavior is what drives people into debt on depreciating assets. Just slows you down.

[Anti.Hero]

and stay away from this idiot. he preys on church goers to get them to buy his get out of debt program. him and suze orman are some of the worst financial people out there.

some advice he gave recently on the air to a dr fresh out of school.

dr had 100k in student loans at 2-3%. somehow he was going to be ablel to pay them off bc one of his family members passed away. ramsey told him to pay off student loans early.

why pay off a tax deductible debt at such a low interest rate when you can invest elsewhere?.... ramsey's response, "the debtor is a slave to the lender..." stfu... whatever.

Ramsey is mainly aimed at helping the idiots who have gotten into $50k, or some ridiculously high amount of debt, and have no idea where to start. Better to completely alter your mindset/lifestyle than to just claim bankruptcy like many would do.

Of course you must get into debt to build your networth, but a lot of people spend money they don't have on the stupidest of and ruin their lives and their children's lives.

You can't take 100% of what he preaches and turn it into most people's real lives, but he is still great if you understand the bigger picture imfo. He's a good guy with a great purpose. Just like every other person in this life, you take the good and educate yourself enough to recognize the bad and go onto someone else.

[Das Texan]

So you'd rather owe money to someone else in an attempt to "game the system" instead of owing nothing to anyone and paying yourself?

say my student loans are 10k.

My interest rate for me at least I think is about 2%.


If i can find an investment that pays about 4-5% for the same amount of money and simply make payments, I will come out ahead.


Paying off federal student loans off early should be at hte bottom of the priority list if you have a great interest rate.

[Fabbs]

Offers from the legit credit cards of 0% for a limited time and/or 0% balance transfers be all over like you know what on you know what.
If the envelope says "You are approved" then you most likely are.

In plain English it means you can get goods or services at 0% for a limited amount of time. Usually a year but even 6 months is okay. If you are buying stuff with your high % card, cease and desist immediately and use instead the 0% card.

0% Balance transfers: Now here is where you really can make some headway on getting rid of interest on cards or loans. A balance transfer means they are going to loan you money (loan, not give) at 0% (for real) due back in an amount of time, most usually a year but again sometimes 6 months. So, take the max amount they will give you (lets say 2,000) and pay 2,000 on your car loan or other high interest card loan balances. You still owe the 2,000, but it is ac ulating 0% interest for one year. Whereas you car and credit card balances are accruing and charging interest on the balance. Make sure you pay off the 2,000 given at 0% and you absolutely will get this offer again next year. And next, and next. Also the other credit card companies will get onboard. Your fico score might be too low at present for you to be getting any 0% offers. But if you are, be all over them. Just exercise self control, knowing that they still are loans. Because they will allow you to transfer them into your checking account. (oftentimes, other times they will only let you transfer them into your other credit cards. And thats okay. Again, by transfering the money into your high interest cards you pay down that balance and are that much closer to paying off the high interest cards. Or car loan.)

There will most likely be a fee for the balance transfer of either 3% of the loan total but capping at a max of $99. Try to schmooze the rep into waiving the balance transfer fee. They are salavating at the commision they get off the loan, and/or how much more it pushes them to hitting quota. However, they may not be able to waive the fee. Still, 3% is peanuts and if for some reason you can get a larger balance transfer loan of say 6,000+, then $99 is a reasonable fee indeed. If for some reason you can get a 6,000 plus 0% balance transfer, the $99 you spend for that will be far offset by the interest you save by paying down on your car or crappy percentage cards.

Your crappy percentage cards: Sometimes just asking, periodically to be given a lower rate will get you a yes answer. Even if you only lower from 17.9 to 14.9, it's progress.

Car loan back to it. If you could get two or three balance transfers at 0% and pay off the entire balance of the car loan, while you would thus still have 3 seperate balance tranfer loans to pay off, remember you are paying them off at 0%. Plus the total monthly payment of the three combined may be the same or even less then your current car payment. Most likely not since the car loan is 66 months and 11K. With your current sitch you probably will only get balance tranfer loans of 1-200, but it still helps to get the ball rolling. Once you do one of these balance transfers successfully you be in the Robots system and you will get more offers.

Capital One has one of the easiest to qualify for balance transfers. Your current bank may have one. Or if the credit union offers one so much the better. The "season" for balance transfers is Oct-Nov as they know a lot of people want money for the holidays. However check those envelopes, take em whenever you can get once you make sure they are legit.
BOA is excellent. Discover is okay too.

Inquiries. What others have written is true. Inquiries can drag down your credit scores. Therefore when talking to credit card or any other lending ins ions, ask them if it will be a hard inquiry or an in house soft one. Often times they can get your credit history in house without alerting the radar. This is what you want. Othertimes they do alert the Robots, that being Experian, Equifax and or the third one. That is the type inquiry you do not want. If the rep does not know, simply ask for the credit manager. In fact on this inquiry front, always ask for the credit manager as you want a factual answer not a guess.

[BacktoBasics]

Lots of bad advice in here. I work hand in hand with lenders every day. So far except for a few other points in here the only good advice in this thread is to work with a credit union. They play by their own set of rules but you need to be smart before you go and talk to them. Here is a step by step process of what you do to get refinaced at a better rate.

Preface: You're spinning your wheels for nothing with a score in the high 500's. Be happy you got 11% with that kind of FICO. You need to raise the score first and stop filling out applications at other places. The Credit Union should handle nearly all of your financing not just your vehicle.

Go ahead and buy all three credit reports with scores. Forget the free just pay to get all them and get them with scores. Personally I pay the 15 bucks a month to get all three reports and scores in real time so I can access my credit report any time I like.

1. Pay down any revolving debt such as credit cards. You need to take a couple of months and pay your credit card balances down to below 35% of limit. Taking a 1k credit card with a 750 balance and paying it down to a 325 dollar balance will raise your score a good 30 or 40 points. Do that with all your credit cards and your score will climb and its all real time so as soon as the credit card companies update your file you'll see the increase. Assuming you have reasonably limited credit card limits.

2. Any delinquet accounts or past due accounts need to be paid or brought to current. No Credit Union will offer you financing if you have 60 days or 120 days late on something.

3. Print out an NADA book value with every little feature and option on it to take to the credit union. White out the part at the bottom that says "base price includes blah blah blah". Then make a good copy to take to them. Some won't accept this because they want to look it up but most will because people are ing lazy, I know my banks won't look anything up if I bring it in for them. Most banks typically just look at the base value not all the options. Do the work for them and it will give your car additional value.

4. Put a minimum 1k down if not a full 10%. Offering the downstroke up front might potentially keep them from asking for more money down. Partnering up a small downpayment and a strong book value from the NADA with a low debt to income ratio is a good start for getting a loan at a better value.

The never financed used for more than 36 months is sound advice but if you keep your vehicles and you're in a tight budget I wouldn't feel bad pulling a 48 or 60 month note if you have to. Send at least one additional payment to pricipal every 7 months. Its worth it.

The never finance used car advice Manny gave is probably the worst advice on here. You need to use your credit....use not abuse. If you have been in the bureau for 10 plus years and have at least 3 lines of credit payed off that had an initial line of 10k or more then yeah pay cash if you can but if you're new to credit and have a limited or lean bureau you need to finance but only if it works with your budget.

As the times change in the finance world comparable credit is now the new debt to income. I have a good 4 or 5 customers come in a month who have high tier one FICO scores like 710 715 and so on that run into problems. The problem being is that they pay cash for everything and might have a few credit cards or a home loan thats been paid off 15 years ago.

They look at comparable credit within the last 8 years. So once your life swings upwards and you start pulling in good money and you want to buy that 25k car or that 20k boat or RV or motorcycle you need good comparable credit within 8 years so or you're gonna get the 2 point or 3 point increase in rate or worse you can't get the loan. I have all the big banks turing prime borrowers down completely based on a lack of comparable credit.

For the first time in the finance world I'm seeing a rush of prime buyers struggle to get good deals.

Now if you can start building a good history with your credit union you'll never have to worry about any of that. I started with a small loan then my land loan and now I don't even have to fill out an application just an information update card. Last two loans I got from them they didn't even run my credit.

[Nbadan]

I got an idea....don't be buying $20K cars and financing it for 72 months, especially a used car...that's sure to raise your credit score....

[BacktoBasics]

I got an idea....don't be buying $20K cars and financing it for 72 months, especially a used car...that's sure to raise your credit score....

Actually no. With a limit file and low debt to income financing a 20k car would probably raise your score a bit. You'd be upside down for the duration of the note but it likely wouldn't hurt your score. Not to mention even if it did lower score due to the debt, after hitting the 8 month mark with timely payments it'll begin to help you. Plus a payed off trade line like that is highly valuable for the next 8 years if you decide to purchase a home or luxury item.

You people have no idea how all this works.

[ashbeeigh]

I got an idea....don't be buying $20K cars and financing it for 72 months, especially a used car...that's sure to raise your credit score....

It was $14,000. You all over estimate me.

[BacktoBasics]

It was $14,000. You all over estimate me.

He doesn't know what he's talking about anyway. Follow my advice and you'll be happy. I deal with underwriters and banks every day.

[Clandestino]

don't pay 15 a month for your credit score...that is ridiculous. Almost nobody needs to see their credit score every month

[BacktoBasics]

don't pay 15 a month for your credit score...that is ridiculous. Almost nobody needs to see their credit score every month

You could not have just given any worse advice. You're the kind of guy that probably thinks that simply making timely payments will ensure a strong credit rating. Horrible advice here. Being that I work in retail and finance and work hand in hand with many national lenders and local I can tell you first hand your advice sucks.

People who give a should be keeping tighter tabs on their credit. I have like most people a very common name. Its never a bad idea to be able to keep up to date information on one of the most influential aspects of your purchasing life.

Other than your free report which does not give you a credit score it costs roughly 25-30 bucks to pull a bureau with score and thats just one time with no updates and there are 3 different bureaus all with different information and all with different scores. Do that once for each and then once again to follow up if you are trying to get something removed or changed and you've nearly spent the same amount of money you could have spent to simply be able to access all three with scores each day.

Half the problem with people making large purchases is that they have no clue how to prep their credit for a big buy. Its not as easy as just making timely payments and it'll all work out. You have to be smarter than that expecially with how tight the banks are getting right now and even more so if you have a lot of revolving debt.

I see people with good credit everyday that could have earn way strong rates and terms had they simply preped their credit for a purchase. Such foolish arrogant people who know nothing are the ones that pay more and have no idea they could have done better.

You are an absolute fool to think its not beneficial to be able to access your credit file at any given moment. Thats why people have such a hard time making purchases.

[robino2001]

Other than your free report which does not give you a credit score it costs roughly 25-30 bucks to pull a bureau with score and thats just one time with no updates and there are 3 different bureaus all with different information and all with different scores. Do that once for each and then once again to follow up if you are trying to get something removed or changed and you've nearly spent the same amount of money you could have spent to simply be able to access all three with scores each day.

I did mine last fall and spent no more than $7.... it was either $5 or 7, don't remember. Yes, it was from one of the big 3.

I won't act like I know jack crap about this stuff because I know simply what I've experienced, but I am with the others when I think there is no reason to have 24-7 access to your credit history/report unless you've had your iden y stolen and there is new stuff going on the report daily. I also don't agree with everyone having to do this and that to prep for purchases unless you've really f'd up your credit and you need to recover it - then, alright... for everyone... really? My wife and I simply made common sense decisions, not missed payments, etc... and we've had no problems with cars, house, whatever... so I simply don't get the soapbox-type rant. You apparently do what works well for you - that's great - but using "fool", "you have to be smarter", "arrogant", etc... there is more than one way to successfully live your financial life and they're not arrogant if it's not your way.

[BacktoBasics]

I did mine last fall and spent no more than $7.... it was either $5 or 7, don't remember. Yes, it was from one of the big 3.

I won't act like I know jack crap about this stuff because I know simply what I've experienced, but I am with the others when I think there is no reason to have 24-7 access to your credit history/report unless you've had your iden y stolen and there is new stuff going on the report daily. I also don't agree with everyone having to do this and that to prep for purchases unless you've really f'd up your credit and you need to recover it - then, alright... for everyone... really? My wife and I simply made common sense decisions, not missed payments, etc... and we've had no problems with cars, house, whatever... so I simply don't get the soapbox-type rant. You apparently do what works well for you - that's great - but using "fool", "you have to be smarter", "arrogant", etc... there is more than one way to successfully live your financial life and they're not arrogant if it's not your way.

Successful and the best are two different things. Lots of people succeed but most could have saved hundreds a month if they had known how it works but lets not forget you guys are already successful so any addition knowledge on how to do it better and save money doesn't matter now does it. Lots of people are happy with 4.99% in interest but they probably had no idea that they may have qualified for 2.99% had they done a little prep work.... minimal prep work.

So typical of the average joe to tell me he know more about finance and that I'm on my soapbox despite the fact that I work balls deep in this daily and you people haven't got the slightest idea on how to prep for a big purchase.

Typical guy just wants to hear what he wants to hear and has no idea on how to make it better for himself....WHY because he already knows everything.

Pulling one bureau for 5-7 bucks is fine sounds like a good deal but there are 3 and there all different and its usually more if you want the score. Over 80% of the population has wrong information on their credit report.

You also probably have never heard of auto induced scores or mortgage induced scores but common sense will take care of you. Most people don't even know what those scores are.

For most people simply knowing what the DTI and available credit to limit numbers are can cut a rate in half if not just 1 or 2 points. Its your money you do what you want but there is a better a way a way that would likely save you 2-3 hundred a month if you'll stop thinking you know everything.

A perfect example

Guy yesterday comes in says he has great credit. He does...he scores a 721.

Earned himself a rate of 6.25% on a recreational loan which is half a point lower than prime for these types of loans.

Had the guy payed his two credit cards down an addition 80 bucks each he would have lowed his credit to limit below 35% of available. He would have earned 5.49% had he done that and waited the 30 days for it be updated on his report.

He would have saved nearly 2k on the difference had he payed the extra 160 and preped his credit for the purchase. He had no idea.

[BigZak]

thanks for the tips life coach!

[1369]

A "recreational" loan?

I know there's a joke in there but I'm serious.

Like for an RV?

[BigZak]

once a home loan rate is locked in, can they raise it if my credit cart debt to limit ratio has gone slightly upward? it wasn't below 35% to begin with mind you....

[BacktoBasics]

once a home loan rate is locked in, can they raise it if my credit cart debt to limit ratio has gone slightly upward? it wasn't below 35% to begin with mind you....

Yes and no. Usually there is a time limit. Thats why they say don't make any purchases until you close. Everything can potentially change from time of quote till time of closing.