|
|
Posted by Keith in Washington on Thursday, April 16, 2009 at 15:25:44 :
In Reply to: Re: I have been accepting payments like that with no problems. posted by Kevin in Ohio on Thursday, April 16, 2009 at 08:06:35 :
Boy somebody found another sore point. The banks and credit companies are really in control. They know that at some time you will need a loan (who can buy a house cash). They screw you as you stated by foring you to take out loans to prove yourself. You should be able to use the fact that you make all of your normal monthly payments such at utilities and etc to prove yourself. They sure use that information if you have missed a payment or two.
Banks and financial firms and credit card companies are not there to be nice to you. They are there to make money and do it with the lowest risk to themselves. They pass as much of the risk onto you as they can. They also talk in terms of monthy payments not total cost. They do not want you to see the total cost as you would more likely walk away if you saw it. It is much easier for them to say it will only cost you $300 per month rather than saying it will cost you 25K. Make them talk in terms of total cost that you are signing up for.
I do use a credit card. It is normally payed off at the end of the month unless we make a concious decison at the time of purchase to pay it in x months. I bought all my supplies for my house remodel that way. I knew I was going to pay 8.5% interest. I took 6 months to pay it off. I used the credit card for two reasons. 1) I had more recourse with the store if there were product issues than if I had bought with cash. 2) I put no other assets at risk.
I used the credit card to my advantage not theirs.
Credit card companies are bad but that is the tip of the ice berg. The real dangerous thing is with rolling debt into your house which is normally the largest asset that a family has.
Banks and everyone else will tell you to refinance your house or take out a home equity loan to get money out of your house to pay for a car or credit card debt. They say consolidate and have lower monthly payments plus take advantage of the tax deductions associated with a home loan. Don't be stupid. Why would you put up your house as collateral for a piece of metal that will rust or last only 3 to 5 years or for those nice dinners you had or the new cloths. The key point is that you should not increase the payments on your house and stop building equity to buy short lived assets or to cover your lack of ability to control your credit card spending.
If you have rolled everyting into your house payment, now the issue is if anything goes south and your income is impacted and you have only limited funds can you still make your house payments? If not, you have screwed yourself.
What if you had not rolled your cars and other payments into your house payment? You might have choices that you no longer have by putting everything into the house.
My belief is "keep your house payment as low as possible and finance cars and etc out side of the house loan". If things go south you can decide what to do. You can let the car loan default and loose it. You can default on your credit cards. You can still potentially pay your house payment. They normally can not take your house for defaultd car or credit card accounts. Protect yourself and do not turn your major asset over to the banks as collateral. Why would you risk your house for a 25K car that is going to die in 5 years. If you keep things seperate and you house payment at a minimum, you will be less likely to be put in a situation of a forced home sale where you can loose a lot. It is a lot less painfull to sell or default on a car than its is to on your house.
Banks and finance people would love for you to take a second out on your house or refinance to get money out. They will get payed cash on the unsecured credit card debt or car that you are paying off. Then with the 15 to 20 K that you took out of your house in the second or refinance they get a stake in your house as it is now collateral. In this process they get your house which is a heck of a lot better piece of collateral for them than that the stinking car (they have transferred the risk to you). The banks would rather have you default on a house rather than a credit card or car loan. They have a much better chance of getting their money back. Not only will they get their mony back but you will pay all the fees involved and not come out with much if anything and your family will be on the street.
The key thing to remember is "Use the banks and financial insitutions to your benefit" You will have to take loans and etc out at sometime. Fine, but do it when it is to your benefit and keep the risk low for you. For example; I have refinanced my house once. The guy across the street talked me into it. He owned a finance company. I was 2.5 years into a 30 year contract on the house. He pushed real hard on me. I said "not interested". Then he sat me down and showed me something. The interest rates had dropped several points since I took out my loan. He showed me that for $10 more a month I could go to a 15 year loan. This would effectively cut 12.5 years off my loan and still pay basically the same monthly payment. I did the math and it would save me $144K as I would not have house payments for 12.5 years I was committed to at that time. That made sense and was a change that was good for me and my family and there was reduced risk to me as my loan would be 12.5 years shorter in length. I also did not increase my risk as I did not increase my payments. It was a win for me I shortend the loan, reduced the total cost by $144K on an $85K loan, and gave me much more finiancial freedom 12.5 years earlier. Yes I did loose the tax benefit of deducting the interest of the loan on my house much sooner but who cares. I would rather have the money that was going into interest payments to have fun with and pay 15 or 20% federal tax on it than be obligated to pay it as interest to a bank. 80% of something is still better than paying 100% of something to a bank as interest.
Banks like the government assume that your money is theirs and they try to take as much of it as they can. They assume that you are stupid and continually find ways to shake you down. Unfortunately, many people are as they assume and fall for the ploys and get screwed.