Financing options in today's market?

[DLTARNU]

I have a few credit cards that I use regularly - but I started only using one card for everything about a year ago. Even though I pay the whole balance off every month, and don't ever carry a balance from one statement to the next, just because I was always up against my credit limit on that card it lowered my score over 40 points. My report said that I was continually carrying a high balance on a card, which indicated to the credit scoring agency that I might be overextended. That couldn't be further from the truth - I was paying off the balance every month, and was just using that card for everything because I liked getting the cash back bonus. But, just that one card caused my score to go from one that was in the top 98% of all borrowers to one that was better than 75% of borrowers. When I went back to spreading my purchases across all cards and paying cash more, after a few months, my score went right back up to where it was before.

Companies that rate your credit look at your debt in relation to amount of available credit. It's a mildly ******** way to evaluate someone's creditworthiness, and I believe it's one of the things that will soon change in the algorithm they use to come up with your credit score. I, like you, carry massive balances per month on my CC's, but I also pay them off each month before interest gets applied.

This annoys the credit companies.

A credit rating would more aptly be named if it was called a "profit probability assessment". They are less concerned about a person repaying the debt than they are making the most money possible off that person. You see, you don't carry a balance, so they can't charge you interest. That's a major revenue stream you're ruining for them. They prefer people who carry a balance, have finance charges applied to their accounts, but who still make their monthly payments on time. And you know who they REALLY love? The guys who are late once or twice a year, which enables them to immediately inflate the APR to something the mafia would charge, but who still make their payments. Those guys are gold mines, but they'll never say that aloud. You can't even factor that into the algorithm because consumer rights groups would pick up on it. The ideal CC holder is a person who carries near a maximum balance, is late once or twice per year, but who still makes all his payments. They make the most profit off that guy.

But if your credit rating went UP for being late with your payments a couple times, people would cry foul. People already get annoyed, and rightly so, that paying off their balances every month, or even never using their credit card, actually HURTS their credit score. I could understand it not having an impact, but to deflate your score for being responsible is rather irritating.

Having said all that, from a business standpoint, I understand the creditors. They are trying to make the most money off their investment, which is the money they let you borrow from them. I still don't like it, but I understand it.

From the lawyers and financiers I talk to, they say the sweet spot for balances is 1/4 - 1/3 of your available credit. Pay on time, take the finance charges. Even though it *****, the increase in your credit score and the associated lower interest rate on mortgages easily makes up what you spend on finance charges from your low balance CC.

 

[Steve 00RT/10]

Checking definitely isn't a bad idea - I learned very recently how some 'little' things can make a big difference. For example, I have a few credit cards that I use regularly - but I started only using one card for everything about a year ago. Even though I pay the whole balance off every month, and don't ever carry a balance from one statement to the next, just because I was always up against my credit limit on that card it lowered my score over 40 points. My report said that I was continually carrying a high balance on a card, which indicated to the credit scoring agency that I might be overextended. That couldn't be further from the truth - I was paying off the balance every month, and was just using that card for everything because I liked getting the cash back bonus. But, just that one card caused my score to go from one that was in the top 98% of all borrowers to one that was better than 75% of borrowers. When I went back to spreading my purchases across all cards and paying cash more, after a few months, my score went right back up to where it was before. It definitely opened my eyes as to how these things work - and the timing is good because I'm keeping my fingers crossed that rates will come down to very low levels soon. A refi that saves me $2k a month in mortgage payments would go a long way toward me contributing to the economic recovery

I checked my score -- well over 800, no issues at all, zero debt to anyone, but not perfect. Why? Probably because of the reasons you list above...which is why I refuse to play their game. I think that's what pi--ed me off when i checked a few years ago. I'll spend whatever I want, on whatever I want, when I want to. Luckily I am at a stage in life where I can do that. (not sure being older is lucky ). The credit rating agencies have turned into sort of a racket in and of themselves....didn't used to be that way.

Let me get this straight. An individual wants to borrow money for 84 months to buy a Viper which comes with a 36 month warranty which can be extended to seven years but the extension does not cover everything. Assuming this is correct, what does that same individual do if he or she needs to borrow money for something essential like medical care that is not covered by insurance or long term care for a parent or other loved one? We are in the mess we are now because people do not understand debt and what it is for and what it is not for. Buying an expensive ( the term is being used subjectively) depreciating personal asset with debt is questionable financial planning at best. (Particularly for someone that needs a seven year term to make it work.) The answer to the initial inquiry should be that the individual involved cannot afford the purchase and needs to do a little self education with respect to the use and accumulation of money as do the millions of people who bought far more than they could ever realistically afford and now find themselves in severe financial difficulties. With freedom comes responsibility.

Well said Bob. The financial industry pushed this mentality as they discovered corrupt methods to leverage their loan business from the traditional 10-1 to 30+ - 1 of cash assets. It was the old: eight to eighty...blind,crippled, or crazy routine for the banks and investment firms....."we got cher money....come and get it" No job -- who cares? The result: Prosperity built on massive debt the last 10-15 years. ...Spend more than you make, instant gratification, negative savings rate nation wide, Big house, but no 'cattle in the ranch' IMO....that's the same mentality that brought 7 year car loans into the mix. ....an absolutely ridiculous length of time to pay back any car loan....much less a very non-essential type of car like a Viper.

That being said, there are proper ways to leverage money....that's how the country was built. I put our 1st Viper against the house (zero other car debt)...and let the cash(all of it) work the stock market for a win/win for us. I paid the loan off with wages in 4 years and got a tax write off to boot

From just a little reading, it would appear HELOCs were another creative way to get people to borrow they couldn't afford. Used responsibly, they can afford some advantages, but I'll bet a meal that the majority were not put to good use.....equity was sapped from the house and much of the money was spent like credit card debt, albeit with a lower adjustable (not good) rate...to afford instant gratification for things that should have been saved for. And until the recent meltdown...the banks laughed.......all the way to the bank

Steve

 

[Mopar426]

84 months...

Someone is trying to live beyond their means.

 

[Dads Toy]

First, tons of great advice. I am planning on finacing my Viper next year. I never have and never would finance any car for more than 5 years and than is pushing it. my last vehicle I financed for 5 years but paid it off in 44 months. I do not mind streatching out the payments sometimes just in case I have a rough couple of months with medical bills. When I buy my Viper, it WILL be my only payment I have other than utilities though.

I figure I can swing one bill to buy my dream car.
I am tempted to buy one now but then I would not be able to pay off my remaining debt and that IS my number one priority. Hopefully your friend is reading this thread.

 

[Bill Pemberton Woodhouse]

I would hesitate to make value judgements based on an 84 month loan , as the majority of loans that we do for this amount are with folks who chose to use their funds in other ways. To categorize them as foolish, is frankly a matter of opinion, as in most cases they are business & professional individuals who see using this money for fun, and cash for the business. Few individuals with Vipers ever carry out the term, anyway, and many want a shorter term payment for the time being. Surprisingly ,many put down a sufficient amount not to be even in an inequity position even from the start. Is this term good for everyone, absolutely not, but it is often a viable alternative for many buyers and Banks usually will ask for higher scores to do said loans ----- so it is frankly a period only due to those with good credit , anyway.

There are many good ways to acquire a new vehicle, yet we often have our own biases that fail to let us see or imagine other folks reasoning or goals. All the options out there have their own place and purpose, so discounting any of them often leaves a gap for a buyer's consideration.

We recently did an 84 month loan for a buyer who needed to do a 50,000 expansion on his business. The business loan floated annually , with the possibility of a rate change each year. He paid for the expansion with cash, and has a fixed rate for 7 years. It made more sense to him, was more stable, and he can pay it off anytime early, with no penalty. Just an example, but one that worked for this gentleman.

Respectfully,
Bill Pemberton
Woodhouse

 

[Bobpantax]

Hi Bill. Regardless of the circumstance it makes little sense to borrow money for 84 months for a depreciating personal asset. If it is not a home mortgage based loan that meets the applicable criteria for deductibility of interest, the interest is otherwise nondeductible. Paying interest with after tax nondeductible dollars is not a very prudent thing to do. But then again, our nation's current economic woes demonstrate that there are millions of imprudent people out there. And many of them will do the same ignorant things again given the chance to do so.

 

[GR8_ASP]

From just a little reading, it would appear HELOCs were another creative way to get people to borrow they couldn't afford. Used responsibly, they can afford some advantages, but I'll bet a meal that the majority were not put to good use.....equity was sapped from the house and much of the money was spent like credit card debt, albeit with a lower adjustable (not good) rate...to afford instant gratification for things that should have been saved for. And until the recent meltdown...the banks laughed.......all the way to the bank

Steve

Not sure how others use their HELOC but I have mine at a zero balance almost all of the time and have it as a reserve line of credit for significant or unforeseen expenses. Only used it once on a large purchase ($25k for a new roof) and it worked very slick. Electronic transfer using my home PC from the HELOC to my checking account. And paid it back the same way. No trip to a bank. No costs associated with opening a loan or refinancing. And the interest was deductible just like a mortgage (as it is a second line of credit against the house). Interest rate is below the going rate for mortgages and has been since I opened it some 5 or 6 years ago. I cannot see any reason to refinance when a HELOC is available. Now I have never used it for vehicles and the like, but that would seem to be a viable option if I were in the market and did not pay for it in cash.

 

[Steve 00RT/10]

Not sure how others use their HELOC but I have mine at a zero balance almost all of the time and have it as a reserve line of credit for significant or unforeseen expenses. Only used it once on a large purchase ($25k for a new roof) and it worked very slick. Electronic transfer using my home PC from the HELOC to my checking account. And paid it back the same way. No trip to a bank. No costs associated with opening a loan or refinancing. And the interest was deductible just like a mortgage (as it is a second line of credit against the house). Interest rate is below the going rate for mortgages and has been since I opened it some 5 or 6 years ago. I cannot see any reason to refinance when a HELOC is available. Now I have never used it for vehicles and the like, but that would seem to be a viable option if I were in the market and did not pay for it in cash.

Ron, you definitely don't fit into the category of HELOC borrowers I was referring to. Nor, probably do many reading this. My guess is that the masses spent the money unwisely putting them further into debt and decreasing the equity built up in their house. I know of several around here who did just that....whether through refinancing and borrowing more money at a lower rate (same payment as before ...more cash in the pocket to spend...less equity in the house) or the HELOC method

When I did the car, it coincided with the proper time to drop to a lower rate for the house loan. Our bank charged 1/2% of principal for total closing costs. Of course, the entire interest savings we realized went right on the principal of the house, cutting the loan duration down.

From the little reading I did on HELOCs, it appears the rate is adjustable, based on the prime, and could compete with credit card interest (up to 18%) if things went awry during the payback period. If the prime rate changes...the HELOC rate will change the very next day. It is definitely riskier than a standard mortgage ARM which typically goes out several years before resetting.

.....If I didn't have the cash to back up the borrowed HELOC money on a car....or at least enough to pay more on the principal in the event of a rate hike (thereby maintaining the original interest rate)...I think it might be best to have a fixed rate.

In your case, a new roof would seem the exact right way to use the product...assuming the werewithall to deal with potential HELOC rate hikes during the payback period.

Are there no fees at all associated with this from beginning to end if untapped?

Steve

 

[Martin]

Are there no fees at all associated with this from beginning to end if untapped?
Steve

Hi Steve,
The maintenance fees and HELOC terms depend on the lending institution. My HELOC doesn't have any fees, I don't have to maintain any draw on it, and the rate is 0.25% below prime - and it adjusts at least one month after the prime rate changes (good when rates are going up, bad when rates are coming down). I almost pulled the trigger on a HELOC about a year ago that was set at prime minus 2% - but I backed out when I found there was a $250 per year fee to keep it active, and you had to draw the whole thing down on day one - and had to keep at least half of the line drawn at all times. The rate was great, but keeping the thing drawn down constantly (whether I needed it or not) seemed stupid to me. HELOCs can be a great and very convenient financial tool - but buy a Viper with one? Maybe when I'm in the 58% tax bracket, rates are guaranteed to stay at currrent levels for several years, and I've got a five year 'golden parachute' clause in my employment contract. In other words, probably not gonna happen...
Martin

 

[GR8_ASP]

Steve you are correct. No fees at all. The rate is tied to the prime but I am not sure what it is exactly, though my monthly statement (even when there has been no withdrawals) probably indicates it. It seems like the rate has been around 3.5 to 4%. Pretty good considering the interest is deductible. I am sure there are people that abused it and purchased without control. If I was like that I would have a whole nest of snakes. Note also that a HELOC can be protection for job loss, to keep the mortgage payment up, as a short stopgap measure. Given these times that is pretty good insurance as once you are jobless the potential to refinance or acquire a loan is pretty low.

 

[Lee00blacksilverGTS]

Hi Bill. Regardless of the circumstance it makes little sense to borrow money for 84 months for a depreciating personal asset. If it is not a home mortgage based loan that meets the applicable criteria for deductibility of interest, the interest is otherwise nondeductible. Paying interest with after tax nondeductible dollars is not a very prudent thing to do. But then again, our nation's current economic woes demonstrate that there are millions of imprudent people out there. And many of them will do the same ignorant things again given the chance to do so.

Wow! What you just said is don't borrow unless you leverage your house further in debt. The all important issue being the tax writeoff. And if you DON'T borrow against your house you are imprudent.
That is EXACTLY the song that was sung by the finance/mortgage industry that has so many folks upside down in thier homes. Unfortunately the tax experts went right along on that merry ride with concurring advice, looks like they still are.
The heck with the all important writeoff. Most folks who can afford a brand new Viper have multiple opportunities for write offs. I would guess well over 50% are self employed.
For that variety of individual there are other factors involved....Cash preservation, whether for business purposes or investment.
And when weighing those factors it sometimes makes real sense, especially when interest rates have never been lower to go for a long term, low interest rate loan.
And if your structure is such that you don't need the write of then as long as there is a substantial downpayment in effect to prevent against depreciation it makes sense.
There is never just one answer for individuals who have multiple financial situations.

 

[Bobpantax]

Wow! What you just said is don't borrow unless you leverage your house further in debt. The all important issue being the tax writeoff. And if you DON'T borrow against your house you are imprudent.
That is EXACTLY the song that was sung by the finance/mortgage industry that has so many folks upside down in thier homes. Unfortunately the tax experts went right along on that merry ride with concurring advice, looks like they still are.
The heck with the all important writeoff. Most folks who can afford a brand new Viper have multiple opportunities for write offs. I would guess well over 50% are self employed.
For that variety of individual there are other factors involved....Cash preservation, whether for business purposes or investment.
And when weighing those factors it sometimes makes real sense, especially when interest rates have never been lower to go for a long term, low interest rate loan.
And if your structure is such that you don't need the write of then as long as there is a substantial downpayment in effect to prevent against depreciation it makes sense.
There is never just one answer for individuals who have multiple financial situations.

Hi Lee. Please read the post again more carefully and read it in the context of my prior post above in this thread. I personally do not borrow at all but I recognize that my circumstances are not typical and that business worldwide would be significantly impaired if borrowing did not occur. As for HELOCs, to the extent that someone feels comfortable with one, having it at as an emergency line of credit has merit. I am old fashioned. I believe that it is best to keep your palace/homestead/nest debt free. When all boats were floating up, many people thought they were geniuses and did many foolish things. For a while their foolishness was covered up by the expanding bubble. As we have all seen in recent months, when the bubble popped, these people were, and are, being brought back to reality in a painful manner.

One poster above used HELOC proceeds to invest in the market and got away with it. Many more did the same thing and lost the bet. And, in losing the bet, some also lost their houses. My own view is that the proper level of risk tolerance is too often ignored and/or sacrificed on the alter of ego and machismo.

There were lessons learned about debt during and after the Great Depression. Unfortunately, over the years many never learned these lessons and others, some of whom thought they were smarter than history, found out the hard way that to ignore the lessons of history comes with a high cost.

 

[ViperTony]

A HELOC is Home 'Equity' Line of 'Credit'. Your home secures the HELOC assuming a few important factors: That there's actually equity in your home, you home/property value is relatively stable, etc. It allows you to utilize your home's present equity as credit which much be payed back plus interest. Lenders have not hesitated to call up borrowers and close the HELOC if they feel borrowers have tapped out the home's equity or feel sufficient income doesn't exist even if they are making minimum payments. I can't help but think of HELOCs as the equivalent of Margin stock accounts. Hopefully, one doesn't get extended to the point of a Margin Call on HELOCs.

It's a gamble. I do know people that have used their HELOC to finance their business or startup and are doing so responsibly. They would've needed to secure a business loan with their home anyway and for many the HELOC is a much cheaper alternative. But in those cases, the HELOC is being used to build assets that generate an income on a very short-term loan basis. Plain and simple: It's not a piggy bank. The equity you are borrowing against is virtual...the home's value looks good on paper but until you sell it and pocket the actual equity in cash its all vaporware.

The problem is that there are way too many people that have max'd out their HELOCs and have gone into foreclosure. Sadly, I know of too many folks that purchased their toys (boats, cars, vacation homes, etc.) while barely mainting a positive monthly cash flow and then suddenly losing it all when one or both spouses lost their job. Just look at all of the cheap exotics for sale out there. Certainly, there are a handful of entrepreneurs and gamblers that used their HELOCs and came out OK. However, those are far and few in between.

 

[Steve 00RT/10]

Hi Lee. Please read the post again more carefully and read it in the context of my prior post above in this thread. I personally do not borrow at all but I recognize that my circumstances are not typical and that business worldwide would be significantly impaired if borrowing did not occur. As for HELOCs, to the extent that someone feels comfortable with one, having it at as an emergency line of credit has merit. I am old fashioned. I believe that it is best to keep your palace/homestead/nest debt free. When all boats were floating up, many people thought they were geniuses and did many foolish things. For a while their foolishness was covered up by the expanding bubble. As we have all seen in recent months, when the bubble popped, these people were, and are, being brought back to reality in a painful manner.

One poster above used HELOC proceeds to invest in the market and got away with it. Many more did the same thing and lost the bet. And, in losing the bet, some also lost their houses. My own view is that the proper level of risk tolerance is too often ignored and/or sacrificed on the alter of ego and machismo.

Bob,

Worldwide business would not just be significantly impacted...it would pretty much grind to a halt without the continual borrowing and leveraging of money to make money. Even in small companies, owners borrow for payroll (among other things -- like plant and equipment) on a regular basis. The world economy could not exist without it. If you have never had to borrow money for anything, you are indeed fortunate and have found the sweet spot for generating income. I have never met anyone who has never borrowed money before. The bigger issue which took the system down was greed --plain and simple.

In reading the rest of your post, it would seem you're referring to me gambling a HELOC in the stock market....and "getting away with it. " I guess I didn't explain it well enough. First, it was not a HELOC, but a mortgage refinance at a lower rate....which I now know carries less risk than a HELOC. Second, I not only had the money to buy the car with, but have overall successfully invested in the stock market for decades. I chose to let my money continue to work for me and take a tax write off as well. Third, we had enough wage income to treat the additional borrowed amount as a car loan within the mortgage...and pay it off accordingly. Had I lost the entire amount, I'd still be through working now, albeit with that much less. My risk was minimal and quite calculated. I wouldn't do it again because the house is paid for and I'm done working. Totally different situation. Like using and paying off credit cards electronically every month, there are ways to prudently and safely use bank funds to advance in life. What I would agree with you on is that anyone who borrowed against their house solely for the purpose of striking it rich in the market was gambling foolishly unless they could easily afford to lose whatever they invested.

Steve

 

[slaughterj]

im afraid to say at this time in our economy,unless u have super high credit score and a healthy amount to put down with that loan,its hard to get someone to pull the trigger for a loan on a viper.

Not at all, just a good credit score alone is sufficient. I just did 100% financing for instance.

 

[slaughterj]

84 months? Seriously? Ouch. Banks are still willing to loan at decent interest rates if you can put a lot of cash down. I'm talking 30-40% cash down. I wouldn't recommend anyone buy a Viper if they needed 84 months to pay for it, just save up while the economy is in the dumper.

You are assuming he *needs* 84 months, but all that was stated is that he is looking for options for 84 months. If you can get a super-low rate, you might as well stretch it out for a while if you can do something else better with your money. For instance, invest, pay off higher interest loans, etc. Or someone may well pay in advance along the way, but want just a base low payment, e.g., if they have income that fluctuates from month to month.

 

[Lee00blacksilverGTS]

Bob, I read them all again, here's what you said.

"Hi Bill. Regardless of the circumstance it makes little sense to borrow money for 84 months for a depreciating personal asset. If it is not a home mortgage based loan that meets the applicable criteria for deductibility of interest, the interest is otherwise nondeductible. Paying interest with after tax nondeductible dollars is not a very prudent thing to do. But then again, our nation's current economic woes demonstrate that there are millions of imprudent people out there. And many of them will do the same ignorant things again given the chance to do so.

I'm certain what you said was don't borrow unless it's against your house. Because of the tax advantage.
And my point was that many took that advice that should not have as they thought only of the tax advantage and then lost their house as the housing market tanked. That's all I said.

 

[ulllose]

Well I looked at this alittle different. What if the loan was 84 months at 0%. No one said anything about the interest rate.
I took out a loan in 04 on a new lincoln Suv......they offered me 0 down 0% for 5 or 6 years. I could have paid cash but with them giving me there 50K for free why would I give them mine that i was earning 5% APR liquid. Seemed like the smart and right thing to do!

Now fast forward 5 years i'm still paying on this truck that is probably worth nothing...lol and sure i could pay it off at any time but its free money and as little as my liquid cash is making me these days its still something.
So moral of the story would I take a 84 month loan, yes I would if I new I could pay for it at any time
and it was at 0% APR

 

[bluesrt]

give me 0 percent on a viper,ill order a ssg from mr wood,or maybe a black vert,grahfit strip aero groupe vert,

 

[ulllose]

give me 0 percent on a viper,ill order a ssg from mr wood,or maybe a black vert,grahfit strip aero groupe vert,

I have not been looking to buy any new cars lately, are the big 3 offering 0% at all?

I know Toyota did it for the Month of November and i think they extended it through December (I saw it on TV) but I'm not sure how well that helped sales in Nov.

 

[bluesrt]

I have not been looking to buy any new cars lately, are the big 3 offering 0% at all?

I know Toyota did it for the Month of November and i think they extended it through December (I saw it on TV) but I'm not sure how well that helped sales in Nov.

they wont right now,they want to get really down and out to sucker who ever they can to feel sorry for theyer ********#es.

 

[compcoupe21]

Wow, with all of the knowlegde of economics on this site the national debt can be cured by spring. Some people finance for 15 years on their homes some for 30 and all the liquid folks just pay cash. If a guy wants to pay over 84 months then let him do so, don't put a negative spin on what might be his only option. As far as a home equity loan is concerned that might not be the greatest idea if someone is not disciplined enough to pay more then the minimum interest due. Even if you pay a handsome amount every month the loan can still drag out for a long time and even though it has it's tax advantages waht if the loan is based on prime and in three years the prime is at 10%. Way too many if's involved, the buyer knows his situation better then anyone and maybe to fulfill his dream he needs 84 months so leave it alone IMHO!!!

 

[OzeViper]

quick reply, stupid

 

[compcoupe21]

Mr. Enthusiast, we're waiting for your intelligence!!!

 

[ViperTony]

If a guy wants to pay over 84 months then let him do so, don't put a negative spin on what might be his only option.

At the end of the day, people will do what they deem fit. But there's always an option...do nothing. Heck if it were 84 months at zero percent...sign me up.

 

[Bobpantax]

Bob, I read them all again, here's what you said.

"Hi Bill. Regardless of the circumstance it makes little sense to borrow money for 84 months for a depreciating personal asset. If it is not a home mortgage based loan that meets the applicable criteria for deductibility of interest, the interest is otherwise nondeductible. Paying interest with after tax nondeductible dollars is not a very prudent thing to do. But then again, our nation's current economic woes demonstrate that there are millions of imprudent people out there. And many of them will do the same ignorant things again given the chance to do so.

I'm certain what you said was don't borrow unless it's against your house. Because of the tax advantage.
And my point was that many took that advice that should not have as they thought only of the tax advantage and then lost their house as the housing market tanked. That's all I said.

Hi Lee. Here is the text of the first post:

Let me get this straight. An individual wants to borrow money for 84 months to buy a Viper which comes with a 36 month warranty which can be extended to seven years but the extension does not cover everything. Assuming this is correct, what does that same individual do if he or she needs to borrow money for something essential like medical care that is not covered by insurance or long term care for a parent or other loved one? We are in the mess we are now because people do not understand debt and what it is for and what it is not for. Buying an expensive ( the term is being used subjectively) depreciating personal asset with debt is questionable financial planning at best. (Particularly for someone that needs a seven year term to make it work.) The answer to the initial inquiry should be that the individual involved cannot afford the purchase and needs to do a little self education with respect to the use and accumulation of money as do the millions of people who bought far more than they could ever realistically afford and now find themselves in severe financial difficulties. With freedom comes responsibility.

The post you quote above should be read in the context of the first post. My personal view is that using debt of any kind to buy a personal use asset ( no depreciation can be taken as a deduction ), except in the releatively rare situation where you know it will be worth enough in the future to justify the carrying costs including interest, is generally not a good idea. However, if a person feels comfortable utilizing debt for this purpose; otherwise has the cash available like one poster above; and is able to obtain an interest rate that allows him or her to invest the available cash in a taxable, insured, safe security that, after tax, yields a profit, I understand the financial decision. Of course, if someone chooses to use the home mortgage interest deduction in this fashion, he or she is giving up part of the asset protection benefit of having a mortgage free home. The Homestead exemption from potential creditors and judgment holders is a very valuable asset protection tool and should not be ignored when making such a decision.

Have a safe and Happy New Year!

Best,

Bob

 

[Flexx91]

I would hesitate to make value judgements based on an 84 month loan , as the majority of loans that we do for this amount are with folks who chose to use their funds in other ways. To categorize them as foolish, is frankly a matter of opinion, as in most cases they are business & professional individuals who see using this money for fun, and cash for the business. Few individuals with Vipers ever carry out the term, anyway, and many want a shorter term payment for the time being. Surprisingly ,many put down a sufficient amount not to be even in an inequity position even from the start. Is this term good for everyone, absolutely not, but it is often a viable alternative for many buyers and Banks usually will ask for higher scores to do said loans ----- so it is frankly a period only due to those with good credit , anyway.

There are many good ways to acquire a new vehicle, yet we often have our own biases that fail to let us see or imagine other folks reasoning or goals. All the options out there have their own place and purpose, so discounting any of them often leaves a gap for a buyer's consideration.

We recently did an 84 month loan for a buyer who needed to do a 50,000 expansion on his business. The business loan floated annually , with the possibility of a rate change each year. He paid for the expansion with cash, and has a fixed rate for 7 years. It made more sense to him, was more stable, and he can pay it off anytime early, with no penalty. Just an example, but one that worked for this gentleman.

Respectfully,
Bill Pemberton
Woodhouse

Well said Bill. How quickly and foolishly we are to judge. Best interests are best served in the eyes of the beholder.

 

[Sellshomesdrivesviper]

Hi Lee. Here is the text of the first post:

Let me get this straight. An individual wants to borrow money for 84 months to buy a Viper which comes with a 36 month warranty which can be extended to seven years but the extension does not cover everything. Assuming this is correct, what does that same individual do if he or she needs to borrow money for something essential like medical care that is not covered by insurance or long term care for a parent or other loved one? We are in the mess we are now because people do not understand debt and what it is for and what it is not for. Buying an expensive ( the term is being used subjectively) depreciating personal asset with debt is questionable financial planning at best. (Particularly for someone that needs a seven year term to make it work.) The answer to the initial inquiry should be that the individual involved cannot afford the purchase and needs to do a little self education with respect to the use and accumulation of money as do the millions of people who bought far more than they could ever realistically afford and now find themselves in severe financial difficulties. With freedom comes responsibility.

The post you quote above should be read in the context of the first post. My personal view is that using debt of any kind to buy a personal use asset ( no depreciation can be taken as a deduction ), except in the releatively rare situation where you know it will be worth enough in the future to justify the carrying costs including interest, is generally not a good idea. However, if a person feels comfortable utilizing debt for this purpose; otherwise has the cash available like one poster above; and is able to obtain an interest rate that allows him or her to invest the available cash in a taxable, insured, safe security that, after tax, yields a profit, I understand the financial decision. Of course, if someone chooses to use the home mortgage interest deduction in this fashion, he or she is giving up part of the asset protection benefit of having a mortgage free home. The Homestead exemption from potential creditors and judgment holders is a very valuable asset protection tool and should not be ignored when making such a decision.

Have a safe and Happy New Year!

Best,

Bob

I concur, signed F & C

 

[Flexx91]

84 months...

Someone is trying to live beyond their means.

Someone needs to actually own (or be able to afford) a Viper before posting on this forum.