May 24

Today, a guest post from Crystal -

Buying your first car is a major milestone, but it’s also a significant purchase that can have long-lasting financial repercussions. You’ll want to choose a vehicle that suits your lifestyle and budget, both in the short and long term. For first-time buyers, navigating the ins and outs of car ownership can seem like a daunting process. Fortunately, there are numerous options are your disposal, particularly when it comes to financing. Keep the following tips in mind to stay firmly on budget.

carimage

Image Source: Wikimedia Commons Public Domain

 

Check your credit rating.

If you’re fresh out of school and have just started your first real job, you may not have much of a credit history to speak of. Check your credit rating to find out if there are areas with room for improvement, because this factor will have a major impact on your ability to obtain sensible financing.

Set a budget in advance.

When you’re comparing cars, you probably are already looking at sticker prices on sites like Carsales that fit within your budget. You also need to look not only at the bigger picture but at the monthly breakdown of car ownership, and stick to your guns when the time comes for negotiation. A good general rule is not to agree to monthly repayments that cost over 20% of your disposable income. This figure should include the car repayments, fuel, and insurance. Look at your finances carefully and choose a maximum figure that you’ll be able to afford.

Stay away from dealer financing.

There’s a definite appeal to obtaining your financing from the car dealership, as this allows you to walk out the same day with the keys to a new car. However, you’ll usually pay extra for this convenience, because financial institutions may offer you more advantageous rates. Before you visit the dealer, at the very least you should obtain quotes from other sources so that you know what your options are. This gives you more room for negotiation with the dealer, and can spare you the extra financing charges that dealers would charge.

Compare loan terms and interest rates carefully.

Whether you approach banks or auto dealers to obtain quotes, you’ll be faced with a variety of loan options. Two areas to look at are interest rates and loan terms. A common mistake for first-time buyers is to agree to a longer term in order to cut monthly repayments, but you’ll pay a lot more in the long term if you go this route. Ideally, your loan term should fall within the 3-5 year range. Similarly, interest rates could vary quite a bit between lenders so try to source several different options to get the best rates. The higher the deposit you’re able to pay, the lower your interest rates will be.

Read the fine print.

When you agree to a car financing plan, you’ll be offered additional services such as payment protection insurance or gap coverage. Be sure to read the loan terms and conditions carefully to avoid paying for these without your consent, however. Lenders may also slip in additional charges such as early repayment or administrative fees. Read the contract from beginning to end, and always ask if you see terms you don’t understand.

By taking the time to set a budget, search outside the dealership for a loan, and read all terms and conditions carefully, you can set yourself up for a better deal on your first car.

written by Joe \\ tags: ,

Jun 17

A guest Post -

One of the very few things that the vast majority of Americans have in common is that most of us have credit card debt! Exactly how much credit card debt, who knows? I’ve seen estimates as low as around $7,000.00 per household and as high as $15,000.00 per household. My guess is that it’s somewhere between. So, let’s say the average household has $10,000.00 worth of credit card debt, that’s a lot to pay back!

The fact that most of us have overwhelming amounts of credit card debt leads many of us to look for a great way to get some help. But, when we search for ways to get out of debt, all we find is a bunch of cool ways to save a lot of money and…oh yea…they hurt your credit score! But, is there any way to become completely debt free without harming your credit score? Of course there is!

Debt Really Isn’t That Difficult

The first thing that you need to know is, although finance guru’s make it seem like debt is a huge mountain to climb with all kinds of twists, turns and obstacles to tackle, it’s not. Debt is very simple, it’s just debt! There are only a few things that you need to know to really come up with your own, great debt relief plan. Here they are…

Over 80% Of Consumers Use Estimations To Live On Mental Budgets – One of the biggest problems that consumers face when paying off debt is, they never know exactly how much money they will be able to pay next month. Not being able to come up with a consistent monthly payment leads consumers to just paying the minimum and keeping them in debt for years and years to come. The first thing that any debt relief program should consist of is an accurate budget spreadsheet! You can make yours free on Google Drive!

It’s Possible To Negotiate Cost With Lenders – Lenders are willing to negotiate in times that require it. For instance, if they feel like they are going to lose your business, they may be willing to negotiate your interest rate. Not to mention, your interest rate will account for the vast majority of fees you will pay for your credit card. Also, in times when lenders feel as though they must negotiate the principle balance or they may never see the money, credit card companies are generally willing to negotiate the balance. Keep in mind, balance negotiations will harm your credit score. That being said, there are a few things you really need to know about these types of negotiations, so, if you want to do this, please read…How To Negotiate With Credit Card Companies.

Balance Transfer Credit Cards Are Available For Those With Good Credit – If your lender isn’t willing to negotiate with you, you may be able to qualify for a balance transfer credit card. With these cards, you can transfer your debt to an account with a lower promotional and long term interest rate. However, when taking advantage of balance transfers, always think of transfer fees and long term rates. In my experience, I’ve noticed that many people skip over these crucial factors and end up kicking themselves for it later!

Your Highest Interest Rate Debt Is Your Most Important Debt – No matter how much you owe total on each of your debts, your highest interest rate debt is going to cost you the most per dollar to borrow. That being said, you should always focus on your highest interest rate first and use the funds that become available once it is paid off to move to your next highest interest rate debt.

Lets Put It All Together

OK, now we have all the pieces, let’s make a plan. Start by making a budget spreadsheet. If your not sure of how to do this, read…How To Make The Ultimate Budget Spreadsheet. Next, use your spreadsheet to organize your debts from highest interest rate to lowest and start calling to negotiate interest rates, or balances in extreme cases. If your lender isn’t willing to negotiate rates, consider balance transfer credit cards. Once you’ve got your rates to where you want them, create a plan that attacks the highest interest rate first leading to less cost overall!

This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance and avid personal finance journalist. Join the conversation with Joshua on facebook!

written by Joe \\ tags: ,

May 16

If you read enough different Personal Finance blogs, you find that there are a number of popular recurring themes. Ways to save on various purchases, how to plan for retirement, etc. The one that’s been haunting me lately is, as the title today says, saving vs paying off debt. There are some obvious choices to be made, such as paying down an 18% credit card or putting that money in the bank to earn .01% interest. (Uh, if it wasn’t obvious, pay the damned card!)

But, then there’s the grey area where the debate really has no conclusion, no right or wrong, just what’s right for you. First, a disclaimer. In the PF blogging community, it’s ok to disagree. Disagreeing isn’t a personal attack in this case, it’s just a different take on an issue. That said, It was two months ago that I read Are 401(k) and 529 Plans a Good Idea When You’re In Debt? I was part of the 78 comments that quickly went up after Joan Otto (Man Vs. Debt community manager) wrote this article in which she described how she’d prefer to go at her debt 100%, even to the point of sharing that she was sorry she or hubby even had their 401(k)s to begin with. She explained that they had a combined $44,000 in their retirement accounts averaging 8% return, but $59,000 in debt costing 14%. Ouch. I understand that’s an issue. The real issue that Joan shared was that their 401(k)s had no match. Game over. Really. Joan’s plan to pay off her debt with a vengeance was exactly the right thing to do.

401kgraphic01

What drew me in to the discussion was where Joan remarked that even if there were a match, she’d pass on it, and take The David‘s advice. If your employer is going to match the first few percent of your income dollar for dollar, my opinion is to take this free money. The match is usually up to the first 4-6% of income, which should leave enough funds so the debt repayment plan doesn’t suffer too much. Joan mentioned paying $2500 per month (wow!) toward the principal on her debt. That’s $30,000 per year. I don’t know their income, but even if we are looking at $100,000, I’d suggest steering the $6000 toward the match if there were one to be had. But that’s all hypothetical.  Let’s move on to a real situation.

My ‘friend’ (ok, it’s a close relative. Let’s stick with friend for this delightful anecdote) mentioned that she’d qualify for a refinance of her mortgage once her credit cards were paid off. $10,000 at 18%, so the $400/month she was paying toward the cards would take nearly 32 months to pay off. She told me that she stopped depositing to her 401(k) and I thought about Joan’s story. My friend’s company  had a match, 4%. This was $3000 left on the table. I looked at the numbers, and made an offer. I wrote her a check to pay off the cards, and she’d putting in $250/mo to the 401(k). Since it comes off the top, it’s $188 less in her take home pay. This leaves $212 to pay toward the $10,000. At the end of 32 months, she’ll still owe me $3,680, but her 401(k) will have $16,000 that wasn’t there before. Yes, the $16,000 is pretax, but she’s over 55, so if she changed jobs she can take it out with no penalty, just tax. At 25%, she’d still clear $12,000. I’m not forecasting any gain, in fact, she’s probably wise to keep this money in the short term bond fund for now, to know that it’s safe. And the refinance – once the cards show as paid on her credit report, the refi should save her another $200 per month.

There’s something admirable about killing the debt, I get that. I get that debt feels like a weight you just want to get rid of. But after nearly 30 years of matched 401(k) deposits, I see the power of compound growth on top of matching deposits. I see that I could have taken $200K over the years and paid off my mortgage by now, or I can have that $200K in debt and far more than twice that sitting in a retirement account. It’s tough to stay the course, especially when you look at how the S&P has crashed twice in the last 15 years. For most 401(k) accounts, I’d say to deposit to the match and that’s it, but walking away from that free money is a mistake, in my opinion. Keep in mind, most 401(k)s offer a low risk investment choice. Even though I might not choose it myself, it’s a good alternative to using the excuse of a ‘risky market’ to avoid saving altogether.

How have you handled the debt decision? Are you passing up a match in your retirement account?

written by Joe \\ tags: ,

Mar 18

A guest post from Joshua Rodriguez -
These days, the average American is no stranger to credit card debt. In fact, we love using our credit cards. But, after war and world-wide financial recession, many of us are starting to re-think our decision to use our cards so frequently. The truth is, more and more consumers these days are becoming interested in paying off their credit card debts. Although, at first glance, this task can seem a bit overwhelming, the truth is, it’s not that difficult. All it takes is a plan and you committing to it! Come on, I’ll walk you through it…

A Step By Step Guide To Getting Rid Of Your Credit Card Debts

Step #1: Preparing For The Battle – I’ve never heard of a fighter winning the belt without preparing first. The truth is, not using your credit cards is going to be a battle best fought with the right weapon. In this case, that weapon is your credit card profile. All this is is a list of your debts. In your list, you should include lender names, balances, interest rates, minimum payments, customer service phone numbers and pay-to addresses for each of your credit cards with a balance.

Step #2: Taking Advantage Of Your Qualifications – The lending industry is a very competitive one and, if you are a customer that is known for paying on time, they will compete for your business. One way that lenders do this is through balance transfer credit cards. If so, check out the market to see if there are any offers that provide lower interest rates than the rates you are currently paying. If so, apply and transfer your balances to lower long term rates!

cut-up-credit-card

Step #3: Commit To A Constant Payment – Your credit card minimum payments are based on your balances. When paying off your debts, this is a crucial factor. If your payments go down every time your balance does, you will NEVER pay off your credit cards! Your best option is to come use an aggressive plan of attack known as the constant payment plan. To do so, add up all of your minimum payments. Now ask yourself, “Is this all I can afford to send? Can I comfortably send extra?”. No matter what you decide, write down the total amount of money you can comfortably afford to pay towards your credit card debt. Now, you have to commit to sending no less than this month’s payments until your debts are completely paid off. If you do, you stand to save hundreds or even thousands of dollars in interest charges over the life of your debt. Which, will now be years less!

Step #4: Go After Your Highest Interest Rate First – Now that you have decided on a constant payment, it’s time to make sure that you get the most out of that payment. To do so, we need to attack the highest interest rate first with the debt stacking plan. Stacking your debts is a very easy thing to do. After all minimum payments are made each month, send an extra payment to the highest interest rate account with the remaining funds in your constant payment. By sending all extra funds to your highest interest rate debt, you will quickly pay it off. Once this happens, send all extra funds to your next highest interest rate. Continue to do this until all of your credit card debts are completely paid off!

The End Result

As a personal credit card debt consultant, I have seen this plan save quite a few people thousands of dollars and years in time paying off their debts! By following this plan, you will reduce your interest rates to the lowest rates you qualify for and attack your highest interest rates with aggressive payment plans! All it takes is a bit of commitment on your end and you will be debt free in no time!

About The Author – Joshua Rodriguez – This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance. Join the discussion about this article on Google+!

written by Joe \\ tags: , ,

Apr 19

A Guest post by Darin Sewell

Today’s world is full of people that at one time or another had great credit but for various reasons now find themselves with bad credit. These people now find it hard to get approved for mortgages, car loans, and credit cards with good interest rates and many of them feel helpless and do not know what to do. If you are one of these people then the article below is going to give you an outline of how to fix bad credit and get back on your feet!

Figuring Out the Cause of the Problem

The first step to reversing your credit situation is to figure out why it dropped in the first place and address that problem head on. There are few common reasons for credit scores to fall and 99% of people with credit issues fall into one or more of these categories.

  • Too Much Debt
  • Missing Payments or Defaulting
  • Not Enough Credit History

Too Much Debt – Sadly this is very common today, people were able to run up debt easily then the financial crisis hit and banks slashed credit limits and a lot of people suddenly had credit cards that were maxed out. In many cases payments also doubled making it all around bad situation.
The best way to address too much debt is to figure out what debt you can pay off the fastest; this is generally the account with the lowest balance. Do all you can to pay that account off then when it is paid off take the money that you used to pay towards it and add it on the next account in the list. You will be amazed that after you start paying off accounts and applying more to the next one your debt begins to shrink rather quickly.
I know this is easier said than done but if you are serious about getting to a better score you need to do whatever it takes. This means getting a part time job, eliminate some luxuries like cell phones, cable TV and other money absorbing expenses. Think about how much you could save and how fast your debt would come down if you were not paying those bills and putting the money into debt reduction!

Missing Payments and Defaulting – This one goes hand in hand with having too much debt. Generally, as your debt increases the payments do as well, eventually the payments can be more than your income and you start to fall farther and farther behind. Then the late fees and over limit fees start to pile on and before you know it you are in massive debt.
Honestly, the only way to remedy this problem is to either increase your income or reduce the payment amounts of your debts. Increasing your income is pretty easy; just grab a part time job. But that might not be enough because you are over your limit; the credit card companies can increase your rates and keep charging over limit fees, basically keeping you in this trap.
To counter this problem you need to get in touch with your lenders and explain to them what is going on. Let them know you want to pay them off but are unable to due to the amount of money you owe. Most lenders have some sort of program to help troubled customers; they will more than likely put you on a payment plan. You will lose the ability to use your account but that is probably a good thing!
Keep in mind that you may have to call many times in order to get in touch with the right person. Always be polite and never give up. In the end the lender will want to work with you because they need the money you owe them.

Not Enough Credit History – Many people today have bad credit scores or no credit scores simply because they never had any accounts that reported to their credit report. Commonly these are the people who pay cash for everything and make substantial use of their debit cards. It is only when they need some sort of financing that they realize the situation they are in. While it may seem like a tough spot to be in it is actually very easy to get out of.
To get out of the no credit history mess and start establishing yourself; you will need to work with secured credit cards, personal bank ones and department store cards. Generally the best place to begin is with a secured credit card. These cards work like a normal card and most report to the credit reporting companies.
The only catch is that you have to let the issuing lender hold money that you deposit in escrow; this deposit is equal to the limit on the credit card. Generally, this is about $250-$1000 and if you default the lender has a safety net, if you close the account you get your money back. Because of this safety net approval is almost guaranteed.
After you have a good secured credit card reporting for a few months, apply for a department store card, but make sure it reports to the credit reporting companies before you get it. Make a purchase here and there with it and always pay it off in full each month. After 6 months you will see a positive credit history being reported about you that will improve your credit score ratings. You can then move on to regular unsecured credit cards, just do not let yourself fall into the trap of running up to much debt.
As you can see there are no real magical ways to fix your credit in a few days or weeks, it will take time and effort on your part. But if you can stay dedicated to the process and stick to your plan you can start to make good progress in a 3-6 months and major progress after that. Just learn from your past mistakes, stay focused and keep moving forward!

written by Joe \\ tags: ,