Category Archives: Financial

Help with Bad Credit Loans

One of my readers, Bill, had this bit of feedback on our Bad Credit video and set of credit help links:

First, using credit score to base a person’s financial ability is DUMB. More and more companies are doing it for mortgages, insurance, to rent an apartment and even job applications! There are some people who have a credit score of zero because they do not borrow money. This means they would be denied an apartment lease or have higher insurance rates.

Second, there is a huge push for people to feel that the amount of credit extended to them is an indication of net worth. They feel the score from the Fair Issac Corporation gives them a measure of worth that is not there. You have probably seen the commercials where the guy says, “I’m thinking of a number…”

I don’t trust credit agencies. Anybody (or any company) who claims that they’re going to help you with anything related to money is in it to make money FROM you.

The same way the entertainment industry pushes sex to young adults in order to get them to buy more of their products, credit is pushed to middle America as a way to “achieving the life you deserve.” There is a bank commercial where the people daydream in the storefront glass window about what they could be doing. I too had gotten swept up in the hype. I did not understand the mind game that was being played on me and just how much it was affecting me financially.

It was only when I saw a financial debt free live event that my entire outlook on money changed. I began to understand the workings behind the strategies, promotions and offers that were all around me. I was able to look my bank teller in the eye and kindly turn down their offer to loan the money I just deposited, at 3% interest, back to me at an introductory rate of 12% interest for the first three months. Now, anytime I hear the words “loan”, “credit”, “finance”, “interest” or “FICO” I pay attention. I haven’t done it yet but I intend to count how many “loan” commercials I see on TV during any given night.

This is a sad story. Far too many people do not understand credit. Moreover, it’s in the industry’s best interest to keep this kind of information at bay. Managing money isn’t easy, and sometimes it’s up to smart software to help (as recorded by Ponzi in her post about Small Business Accounting Software.

Another thing I woke up to was that, in my experience, many people in the finance community treat information regarding the pitfalls of credit as their own personal secret. I have encountered more than three times a situation where I briefly mention what I have learned and the response is something like, “That is very sound financial advise.” One of these instances was from the very same bank teller mentioned above. My frustration is that more people are not talking about this.

Amen, Bill! Where else can we turn for true credit help?

Pay Off Student Loans

Continuing the student loans thread, I went back and asked my LinkedIn contacts how they paid off their student loans. Their stories provide both advice and inspiration to anyone feeling trapped by education debt.

Jason Carey:

People actually pay them off?

Sheilah Etheridge:

The hard way, one month at a time. Never late, never skipped a payment. When ever I had extra I would make the regular payment plus an additional amount to the principal. Once it became managible I was able to pay the balance in full.

Chesley Coughlin:

My startup got bought out by intel in 1999. Good bye debt!

Christopher Turek:

I kept ignoring it until…..My great uncle (who I had met exactly once when I was 7 years old) died and left me $17,000…. There was plenty left for beer and cigarettes (Even after I paid off the remainder of my loan)…Ohh yeah I also bought some good audio monitor’s and a 16 channel mixing board PLUS paid my rent. Boy 17K went along way in ’89! Thank you Uncle Morey!!!!!

Ben Wilkinson:

stock options!

Jim Hendrickson:

I had about $15,000 in student loans when I graduated in 1985. I deferred for four years while I served as an Army Officer. I did a Sallie Mae consolidation loan at about 6%. The term was fifteen years and if memory serves it was around $110 per month. I started paying off a month at a time while I started my civilian career and paid my dues. About 9 years in, my financial situation improved significantly due to promotions etc and I had the money needed to pay it off. I chose to do so more for convenience but loved the idea of the loans being gone.

Steven Vaughan-Nichols:

The long, hard road of one payment at a time. When I had extra money, and my higher interest debt was paid off, I put any additional cash I had into paying it down more quickly. I finally got it down to the point where I was able to pay off the remaining balance with one big check. It’s like any debt. Avoid getting unless you need to, and when you get some, pay if off as fast as you can, starting with the highest interest cost loans and working your way down. For morale purposes, I also found it helpful to pay off small debts that I could take out fast even if they didn’t have high interest rates. I just wish I had figured out this finance 101 lesson earlier in my life. As it is, however, I have had zero debt for years. It’s a great feeling.

Jason Unger:

Still paying it off! But with automatic online payments, I’m never worried about having a late fee or forgetting to write a check! Online Savings blog

Alex Harford:

I continued to live like a student, after getting a full time job. No new toys, car, or anything like that. I was lucky to get some good co-op positions that reduced my need for loans, but I still came out with $10k owing. By living below my means, I paid off the loans in 18 months.

Jennifer Carey:

I got hit by a car. I paid them off with the insurance settlement.

Seth Schneider:

I had a bit less than $15k in loans when I graduated. I hated the idea of being in debt, so I paid it off as quickly as possible. Even though I didn’t have a high paying job after graduating, I lived frugally and managed to pay it off in about a year. Financially I might have been better off investing some money and paying off the loan more slowly, but I just didn’t like the debt.

Roger Wong:

I’m paying the minimums because given the interest rate differential, I can make more investing the money instead of using it to pay off my loan.

Don K:

I didn’t pay mine for over 20 years !! Every year they kept my tax refund which amounted to next to nothing – then a few years ago I wanted to buy a house so I got in touch with them, and they agreed to drop all the interest for 20 years and settle for half of the original loan 🙂

Scott Terry:

My last year of college saw enough grants and scholarships to pay for both semesters, and I was even approved for a sizable student loan. Looking back, I *wish* I had not taken it! The interest I ended paying on it was far from the worth of the things I bought from using it. Ugh 🙁 My advice? Skip student loans as much as possible, especially if you don’t need them. The burden of the debt just isn’t worth it.

So, what’s YOUR student loan story?

Bad Credit Report Repair

Even though the live stream wasn’t working very well at the time we recorded this, I’m pretty pleased with how this video / conference call turned out. Keep in mind, possibly before you watch (or listen) to our segment, that Jason has fully explained his situation in the How to Repair Your Credit post. There’s no way you could crawl out of hundreds of thousands of dollars of debt with nothing more than minimum wage. I’ve (thankfully) never been in such a dire situation before. The worst debt I’ve ever been in involved my student loans.

None of us here are credit experts – and there are plenty of people in this world who take advantage of this fact. It’s all the more reason we must start sharing these money-saving (and in some cases, life saving) tips with one another. There are so many little things you can do to help your credit rating, whether it’s in good or bad standing.

Student Loan Consolidation: Eliminate Them!

I started my student loan discussion by asking virtual friends about their opinions, which quickly spun out into a separate student loan debt entry. The more I started to think about it, the angrier I started to get.

I remember applying for student loans and being nervous about getting turned down. Sorry, but I grew up in the middle class – neither poor nor rich enough to afford a higher education that might keep me from being poorer and potentially help me find financial success. But the idea of student Financial Aid always pissed me off. I was bitter, depressed, and most importantly: offended.

It’s not right that we charge our citizens (of any age) to become a productive member of our society. It’s just… not… right. I’m not saying that education doesn’t cost money, but it’s no wonder why kids today see no hope for their own future – knowing FULL WELL that to get to the future, they’ll need to do the very thing they’ve been told by their elders not to do: climb into debt.

…what the hell kind of lesson is that? Oh, I’ll tell you what kind of lesson it is. It’s student loan corruption, at the highest levels:

America isn’t going to find salvation in charging its people to make America better – period, end of f’ing story. This isn’t about being conservative or liberal, Democrat or Republican… it’s about abandoning the institutions which have already abandoned their constituents. Rather, the institutions which have already begun to serve a completely different kind of constituent.

Student loans? Hell, this country should’ve paid *ME* to go to college.

Coins: Money in the Bank

Gabor Bognar submitted further feedback on collecting coins:

Chris, I’ve spent some time looking at this issue, though I’m not myself a numismatist. For the avoidance of doubt I’m not expressing an opinion on the attractiveness of this asset class, just sharing some of the information I’ve found:

Robert Brown wrote a study on the long-term rate of return on rare coins in the Journal of Financial Planning in August 2005.The Professional Coin Grading Service (a division of Collectors Universe, Inc.) publishes various coin price indexes, including historical data back to 1970. The US Coin Values Advisor website, maintained by Daniel J. Goevert, publishes price and rate of return tables for individual coins by grade starting from 1950.

As an economist, I’d say that price indexes of the type presented above may overstate the rate of return available to investors even if the underlying data and the index calculation methodologies are correct. This is due to the fact that price indexes do not capture some expenses a coin investor will inevitably incur: transaction costs, insurance, storage. However, in the absence of available data I cannot quantify the impact of these expenses.

And so did Jim Parker, responsible for Product Marketing & Management for Samsung’s CDMA, UMTS & Mobile WiMAX Wireless Infrastructure product lines:

No, in my opinion is a bad investment as the bid & ask spreads are too high! You can buy: stocks, bonds, real estate and even gold w/o incurring the high bid & ask spreads that you have in collectables. If you want to collect coins, so be it — just do not do it as an “investment” as you will not likely make any money,

Credit Score Tips

Ponzi loves working on improving our respective credit scores (I swear, it’s a hobby of hers). LordKat was busy this week with a set of fantastic articles related to credit and credit scores:

Too good for anybody to pass up. Thanks, Jason!