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Friday, July 04, 2008

Dude Where's My Car?...Seriously

I woke up in a hurry knowing that I only had about 45 minutes to get ready. That's 45 minutes for my daughter and me to bath, dress, do our hair, eat, grab everything we needed and get out the door - not a second to waste or spare. We made it, but going towards the parking lot it took me a few seconds to realize that something was missing. I kept walking though because I was certain my eyes were playing tricks on me. Yet, when I reached our parking spot our truck definitely was not in it, nor was it anywhere else in the parking lot. Way to start the day.

My initial shock quickly turned to frustration once I realized what had happened. Our financing company (the powers hereby known as HSBC) had sent someone out to repo our truck, when just days before they were on the phone reassuring my husband that we would be in the clear as long as they got some kind of payment. I think back now and realize that when they were asking him to 'update' his information, they were actually confirming our address and then waited until the day he deployed to come out. So there I sat, husband having just left, a million things to do that day, no transportation, and certainly nowhere near the almost $3,000 I knew we owed on the note. Plus, I kept wondering how I was going to tell my husband that his prized Harley Davidson edition F150, that he had worked so hard for and loved more than me, was gone.

I had half a mind to let them keep it because we could never really afford the thing to begin with. I couldn't let it go though because they said there would be no repo if we could send a payment and make arrangements for the rest, which we did. I spend the rest of that first day making phone calls to see who had taken the truck, why, where it was and how much they would accept to at least get it back. It didn't really surprise me that I got the runaround and for some odd reason no one knew anything except that we owed them money. Day two was spent doing the same thing, this time with a little more success. The representative I was working with told me he could keep the truck from going up for auction, but the kicker was that I had to give him $2,000 and he could only guarantee the offer for two weeks. I thought that was outrageous since 1) they shouldn't have taken it to begin with after what they said and 2) if we could afford to give them that much then the note wouldn't be past due. Needless to say, day three was spent calling around and begging my family for money and luckily I was able to scrounge up what I needed. Day four, I called up the company and arranged for payment in hopes of having them release the vehicle back to me. Once this was done, they gave me the information for the impound lot and this is where the real fun began.

If you noticed, everything I just described took place over the course of about four days. The next day I went to the company that took the vehicle, paperwork in hand, thinking I was on the way to pick it up. Turns out that it wasn't there, and according to paperwork the company had on file it was transported to the auction lot in North Carolina two days after it arrived at their facility (we lived in Virginia at the time, about 4 hours away from where it was taken to). I don't think the word upset is enough to describe what I felt like at the time. After a verbal battle with the employees there, I was able to get about half of the contents of what was in the vehicle, information for the auction company, signed some papers and high-tailed it right back home to give a piece of my mind to Mr. HSBC representative. This guy assured me that the truck would be safe and kept from auctioning for two weeks, not knowing that while I was talking to him the first time, the vehicle was already on its way to another state. He proceeded to tell me that he had made me no promises and that my payment was good enough to keep the truck from actually being auctioned but not from being transported to the auction site. How much sense did that make, really? After some more time on the phone, he agreed to send over the necessary paperwork and it was up to me to and make sure all was well from there. By this time, it was the end of the business day so I had to wait yet another day.

First thing the following day, I called the auction company and went though the whole rigmarole to get the truck officially released and ready for pickup. To make a long story even longer, I was told that I had no authorization from the finance company to do anything and only the owner could come down and claim the vehicle (it was in my husband's name). So I had to contact the HSBC rep, once again, who had the nerve to tell me that he had NO IDEA that I had intentions to pick up the vehicle myself, which is why I didn't have any kind of authorization. I asked him how he figured I wasn't going to pick the vehicle up if I was the spouse of the owner, had paid him every dime we had, went through all that hassle and had previously informed him that the owner was away on a deployment. I shamefully admit that we argued about this for about 15 minutes before he transferred me to a supervisor at which point I just got off the phone. In the end, and after they received every piece of paperwork imaginable, had exhausted all their excuses and wasted enough time, I was able to get a friend of mine to take a road trip with me to go pick up the prize.

Here we are about a year later still struggling to keep up with these payments and wondering when they will strike again if we're even a day late. There's no convincing my husband to consider trading the truck for something more manageable because it's his and he's determined to get it paid off to show these people that he can. He financed it for about $28,000 and is paying $650/month with an interest rate well over 14.5%. No one will refinance with us for lower rates and payments, and no matter how much we pay it seems like the balance owed is always $2,000+. It's insane and there's no light at the end of this tunnel.

Cars and car loans are much more attainable these days, even with some bumps and bruises on your credit. A person could be denied for a $500 personal loan, but then turn around and get a $10-15K car loan (I can vouch for this from personal experience). This can be a positive advantage for those who really are in need but don't have the best credit record; yet it could also be a trap that causes people to dig themselves further into the hole with debt and no help or hope of getting out. The lessons to be learned here are always pay your bills on time, of course, but also never bite off more than you can chew. This way you stand less of a chance of running into a situation where you can't pay on something. When it comes to leasing and financing, always be aware of what you are getting yourself into by knowing and fully understanding the terms, rates, payments and any other important details and fine print.

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Wednesday, January 23, 2008

Cosigning for Kids - Is It Worth the Risk?

There are lots of parents who cosign for vehicles, apartments, and homes for their children who have little or bad credit. Sometimes a parent has to sign as a primary owner with the child as a secondary owner. My mother supported me in this way when I was younger. However, is it always worth the risk to go out on a limb for children and loved ones?

A friend of mine would be inclined to say no.

She took on the primary responsibility for her young daughter's car loan. The twenty-something daughter needed reliable transportation to move between freelance IT job opportunities, as that was how she made her living. She also was involved in weekly church activities that ended at night. No mother wants her daughter to be vulnerable, so she agreed to put her credit on the line for her daughter's protection and convenience.

Needless to say, this story does not have a happy ending.

In short, the daughter, who was also generally irresponsible, stuck her mother with the bill more often than not. The daughter was quite the diva, and her feelings of entitlement caused her mother to become financially strapped in order to keep from ruining her credit.

Sometimes kids need and appreciate a hand up. Sometimes parents can become enablers. My children aren't even old enough to ride bicycles yet, so I dread the day when they ask me for a set of keys. It must be difficult dealing with issues of whether or not to help certain children in certain ways. This must be another side of what people call "tough love."

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Saturday, January 05, 2008

No More Car Payments

For some months now, I had been thinking of dumping some cash into a certificate of deposit (CD) because the Fed is currently in a cycle of cutting interest rates. The Fed has been cutting since mid-September of last year, and when the Fed cuts the benchmark Fed Funds Target Rate, yields on CD's and money market accounts drop as well. About 3 months ago, when I first got the urge to invest in a CD, the annual percentage yield (APY) on a 12 month CD at my credit union was 4.16%. Today, the yield is 3.6%, and since the Fed will be lowering rates some more, the yield will only head south in the coming months.

But then I thought about my car loan, on which I'm paying an even 6.00% annual percentage rate (APR). Does it make sense to invest in a CD paying less than 4% APY, when I'm paying 6% APR on my car loan? No, not really, especially because a car is a depreciating asset. The resale value of my car holds up very, very well, which I was able to verify by checking out prices on eBay Motors, and looking up estimates on Kelly Blue Book and NADA for the same make and model. But a car that's accumulating miles in the Northeast USA, where there's plenty of car-corroding salt and sand, will always depreciate over time, so my baby is still losing value, though at a relatively slow pace. So, despite the pleasant fact that the realistic value of my ride was higher than the balance on my car note, it became very clear to me (don't you just love clarity?) that the right thing to do was use my spare cash to payoff the loan, and invest in a CD later.

paid! mine!So, last Wednesday, I logged onto the Capital One website to get a payoff quote for my auto loan. On Thursday morning, I visited my local post office and mailed, via overnight express, a check for a tad over $9,000. Today, I was able to login to the Capital One site and confirm that the payment was received. Yahoo. Feels pretty good: I own a great car, and I no longer have car payments (I was paying around $349 per month.)

Actually, if the interest-rate environment isn't looking good in a few months, I may opt to payoff my student loan instead of getting a CD. I would need another $10,000 or so to pull that off, so it won't be an easy decision. The only positive thing about student loan debt: the interest is tax deductible (at least it has been; it may not be anymore since my balance is relatively low now.) I think the urge to payoff my student loan will increase as the months pass, because it's now the only debt I have where I am paying interest, and I'm really tired of paying interest!

Will my car loan payoff boost my credit score? Maybe a little. I'll report back as soon as my FICO score is updated.

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