In article
<1ce4d16e-02cc-4f16-84b4-5b590a521009@[EMAIL PROTECTED]
>,
Mikki <mikki@[EMAIL PROTECTED]
> wrote:
> Thanks for the info, John! I will call my loan companies on Monday to
> see if skipping some regular payments will be okay.
>
> > Beyond that, I'd need to know what your car loans look like. That
> > would be the original purchase prices, the original loan values,
> > when that was, the rates of interest, and current balances.
>
> Both cars were purchased in June 2007:
>
> Car 1 -
> Purchase price $24,000
> Original loan value $24,000 (no money down)
> Interest rate - 1.9%, 60 month loan
> Current balance - $17,000
>
> Car 2 -
> Purchase price $16,000
> Original loan value $11,200
> Interest rate - 11.64%, 72 month loan
> Current balance - $3,500
You have way too much invested in cars. A normal car loan is
3 years. Any longer means that you are buying a car that is
more expensive than what you can afford. And going out 72
months is pure and simple financial foolishness.
You had a chance to save money for a house, but you invested
in cars. In 5 years, these cars will be wore out and ready
for the junk heap, yet you will still have payments to make.
Had you bought reasonable cars and put this car money towards
your house fund, you would be ready to buy a house today, and
be on your way to owning an asset that actually goes up in value
over time, and you would have caught it at a time when interest
rates are near their historical lows and prices are very low.
Those two cars may have cost you $200K in additional house
purchase price and interest fees over the next 30 years.
Since what is is what is, I'd do unnatural acts (ie, beans and
rice for food) to scrape up the $3500 and get car #2 paid off.
That gets rid of mafia-rate loan shark interest that you are
paying.
I'd consider selling car #1, and replace it with a 5 year old
Toyota Corolla with 125,000 miles on it. You can pick them up
very reasonable, and they will run another 125,000 with little
trouble. That will clear up $17K in debt.
> The only other debt that we carry is about $4000 on a no-interest
> credit card, which we pay $250 a month towards.
Yet another sign that you are spending more than you earn, mostly
due to the huge car payments compared to your incomes. Again, do
whatever you have to in order to get this paid off. Sell the dog,
deliver pizzas, do some E-bay, or whatever it takes. You should be
able to put $1000 a month towards this and get it wiped out in 4
months. Then don't ever do that again.
This credit card debt is a real red light. It tells me that you
cannot afford to live on what you earn today. It also tells me
that you have absolutely no chance to live on what you earn after
you add a house payment to your budget. You have to get these
bills taken care of before you even begin to think about a house.
Getting a house when you have a ton of credit card debt and two
car loans would be like getting in the express lane for financial
disaster. What happens if one of you gets sick and cannot work,
or you get downsized and cannot find a job for 6 months. Do you
want to lose everything just because a normal life event happens?
> As for scraping up money for the down payment, I would qualify to pull
> $10,000 from my traditional IRA and we also have about $9,000 in
> contributions in our Roth IRAs, but I would rather not touch those if
No, no, no. Never, ever pull money out of retirement to buy "things".
You will need that money when you turn 65. If you spend it now, you
will end up having to fight the stray cats and dogs for the leftover
food in the dumpsters. Not only that, but there are huge fees and
penalties for pulling money out of an IRA (in most cases). If you
pull out $10K, you may have $5K in fees, taxes, and penalties.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@[EMAIL PROTECTED]
Newave Communications http://www.johnweeks.com
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