We got new credit in a second!! Unsecured! Wow

[LSUTiger32]

LSU..

Total interest paid on car: $728
ROTH Contributions: $7970
ROTH Value 10-15-10: $8494 My mistake--you're dead on with the ROTH value

I have paid more towards the car but as I said above the ROTH will earn interest for 20+ years. On top of that I can make a withdrawal from the ROTH with no penalties up to the total contribution if the need arises so the money remains liquid.

Logan

So, I was pretty much dead on....right? Yes, in the long run you will make more in the Roth. I didn't realize you had the money upfront, I assume you had a good deal of it because you only had November/December to do $3,000 assuming you already maxed out this year at $5,000.

I totally agree with you on the ROTH, but the point was that using credit to start the thing is stupid. In the short term, while you pay off the car loan you are actually losing money. Next year you might get close to breaking even and in the third year you could begin to make some money assuming the market continues to rise. Had you just put the money in the ROTH on the car, you'd just about be done paying it off already and then you could start the ROTH. You'd be in the same position in 20 years you just wouldn't have had the risk of having a car repoed if the worst case scenario hit you.

My point was that you did all of that work and putting money here and there for nothing. Just get out of debt and then attack the ROTH. I am all about the ROTH, believe me!

Let me add that I can see and have said in the past that I understand people want to buy a home in the future. I believe there are ways to do it without credit. FHA guidlines clearly state that you must have to either re-build credit or have DECIDED NOT TO USE IT ANYMORE. I suggest not using it anymore, but one small car loan, say $5,000 or less and a secured credit card do the same thing for you and trying to see how much of a credit limit you can get and buying a $30,000 at 22% interest. One is smart and one is what you would see if you looked up insanity in the dictionary. You can re-build your credit without going into stupid mode.

[Fallonedward]

Tobee, I'm so excited for you. That is really great news!!!!

after being discharged, i really thought i would wait it out about 6 months or so to apply for any credit. we had toss the topic over and over again.

one of us believes we should never have it again....and one of us KNOWS we need to get a mortgage again (guess which one I AM!! LOL!!).

ok so i did it.......i could not believe it...capital one...

we just got the answer this morning...we each applied separately we BOTH got unsecured cards....first SHOCK....

one of us got $1500-UNSECURED
and the other got $1300-UNSECURED

annual fee is $39 each.

both cards are 12.99%...so although that's high it's better than 39.99%!

i'm still floored...it's just been over 2 months since our discharge.

the only thing we can think of, is our credit cards didn't have much time to report late since we paid up until we filed....

neither of us wants credit ever....but we have an 11 year car....and we are going to have to get a mortgage so whether we like it or not it HAD to be done. so i'll use them for grocery shopping and then pay them right off...just to get some credit back on our report.

is this usual????

[Logan]

I totally agree. How is your new daughter doing?

She's great. She's a handful in the evenings until I hand her off to the wife at midnight and the believe it or no she sleeps after her feeding from 1am to 6am. We actually set the alarm to wake her up .

Logan

[backtoschool]

I'm just trying to point out that credit is good when used as a tool. We looked at cars, new and used and we decided on a new car. I could have it paid off but what does that really do for me? I am maxing out my 401K and a ROTH which will earn much more interest (Hopefully) in the long run than the interest paid out to Chase Auto.

It's also a matter of wants.

Logan

I totally agree. How is your new daughter doing?

[Logan]

I agree with you Logan that financing a car at a low interest rate, and putting money into a ROTH ira, is a good plan and will earn you more money in the long run over saving up cash for used cars and then paying for them in full. (Most savings accounts pay between 1% and 1.5% or less so you are not earning anything on your money as you save it to pay cash for the car) Let's even assume you are investing the money to pay for the used car in full and then cashing out your investment when it is time to pay for the car. Most likely you have the money in a short term cash-equivalent fund like a money market fund. Cashing out the investment will usually cost you transaction fees that will negate the savings you made on the small sum of money. Over time, you will come out ahead by financing the car and investing the money in more long-term investments like stocks which have a higher rate of return.

I'm just trying to point out that credit is good when used as a tool. We looked at cars, new and used and we decided on a new car. I could have it paid off but what does that really do for me? I am maxing out my 401K and a ROTH which will earn much more interest (Hopefully) in the long run than the interest paid out to Chase Auto.

It's also a matter of wants.

Logan

[backtoschool]

LSU..

Total interest paid on car: $728
ROTH Contributions: $7970
ROTH Value 10-15-10: $8494 My mistake--you're dead on with the ROTH value

I have paid more towards the car but as I said above the ROTH will earn interest for 20+ years. On top of that I can make a withdrawal from the ROTH with no penalties up to the total contribution if the need arises so the money remains liquid.

Logan

I agree with you Logan that financing a car at a low interest rate, and putting money into a ROTH ira, is a good plan and will earn you more money in the long run over saving up cash for used cars and then paying for them in full. (Most savings accounts pay between 1% and 1.5% or less so you are not earning anything on your money as you save it to pay cash for the car) Let's even assume you are investing the money to pay for the used car in full and then cashing out your investment when it is time to pay for the car. Most likely you have the money in a short term cash-equivalent fund like a money market fund. Cashing out the investment will usually cost you transaction fees that will negate the savings you made on the small sum of money. Over time, you will come out ahead by financing the car and investing the money in more long-term investments like stocks which have a higher rate of return.

[Logan]

LSU..

Total interest paid on car: $728
ROTH Contributions: $7970
ROTH Value 10-15-10: $8494 My mistake--you're dead on with the ROTH value

I have paid more towards the car but as I said above the ROTH will earn interest for 20+ years. On top of that I can make a withdrawal from the ROTH with no penalties up to the total contribution if the need arises so the money remains liquid.

Logan

[Logan]

I assume you mean 2 ROTH's because you can't put $8,000 in one ROTH since last Novemeber. With this logic, why pay extra on the car? Pay minimum payments on the car and max out the investing. Of course, that doesn't take risk into account, nor does it make you think.

You invested $8,000 over a year or $666 a month into ROTHs. I am going to guess that it's made about 10%......the market isn't setting the world on fire so this is generous, probably. Since you invested it over the year and not all at once it would be closer to say $8,500 right now (money invested on a monthly basis) than $8,800 (a 10% gain on money invested at one time). In that case, you made about 6% on the money as a whole. At the same time, a car loan of $22,000 at 4.5% costs about $82 a month in interest because the interest is calculated on the whole balance every month. You paid $975 in interest at minimum payments and using ($10,500/12) or $875 a month as a payment that you said you paid you saved about $140 over the year in interest by lowering the principal. The total interest paid using a $975 monthly car payment on the loan would still be $838 for the year. You would have had to get a return of between 19-20% over the course of the year to make the same money as the car loan. You seem to be using the notion of compounding interest (which is actually working against you in this case) and the idea of what $8,000 could do in a year if you put it all in there at the beginning of the year. It's not the same. Basically, you went through all this work to lose money unless of course you ROTH made you 30% during a time in which the market pretty much sucks. If it did make you 30% in the last 12 months, please tell me what you are invested in......cause hot dang, I want some!

LSU,

1st, this is one Roth. Yes you can put 8k in from last November. I had until April to max out last year an I'm now contributing for this year.

2nd, let's assume your assumptions are correct. Your definitely high on the interest paid for the car and low for the Roth. The gains for the Roth come in waves and I dollar cost average so when the market moves my gains come quickly.

One thing you're not considering is my ROTH can make interest indefinitely. It could also lose but I do go after dividend stocks and my track record is pretty good. Also, I am limited to how much I can invest in a ROTH so if I didn't contribute last year or this year I could never catch up with the lost potential.
Also, in a few years I have the potential to gross above ROTH limits so it's now or never to get some tax free gains.

Your logic is good for the short run but I'm looking long run since I have no intentuon on touching the Roth for 20+ years.

Logan

[platter]

Hi
Just to let you know I owed Cap one 6000 that ended up 8600 I think on my chpter 7 in Jan 2009. I stopped paying them 18mos b4 they sued me also and got a judgement. I also got a new card with them per offer in mail for 1000. No monthly fee , 39.00 annual fee, and nointerest until june 2011. They also sent me a 30,000 ck for car ( I did not cash of course) So I do not know what their logic is. They also have sent me a reward zone card offer . I guess they figure we can not file bkrptcy again for 8 yrs. I know I am not getting into the cc trap. I plan on paying for gas with it and paying off each month.

I read somewhere that said just what you're figuring - that you can't file bankrutsy again for 8 or so years so they have you for a while. The card companies hate the ones that pay off their amts each month, I think they're called the 'deadbeats' by the company because they don't keep the debt running.

[LSUTiger32]

That's great that you will have your house paid off in 7-10 years!

I know, and I will still be in my early 40's at that point. Of course, it's a plan and plans change but I have it all mapped out. I just have to make it happen.

[backtoschool]

Yeah, I have some student loan debt as well plus the house so we are no where near debt free. It's going to take about 7-10 years for me, but that is house and all. We should be done with the things that weren't discharged in about 2-3 years....but some of those things were our choice.

That's great that you will have your house paid off in 7-10 years!

[LSUTiger32]

I totally understand not wanting to owe anything after bk. But since I am still so burdened with my student loan debts, I never have felt debt free after bk anyway. Not having a car payment would not make me feel any more debt free than having one, so I chose, to get a new, reliable car. I do keep my cars for 7-10 years so it all works out.

Yeah, I have some student loan debt as well plus the house so we are no where near debt free. It's going to take about 7-10 years for me, but that is house and all. We should be done with the things that weren't discharged in about 2-3 years....but some of those things were our choice.

[backtoschool]

I hear ya, and with the lower amounts like I said I really can understand. Also, I remember you saying that you drive yours for like 10 years so that's understandable as well. The more we talk, the more I think we have more in common than we think.

To me it's also a perception right now. I just don't want to owe anyone anything after what I went through since August of 2005.

I totally understand not wanting to owe anything after bk. But since I am still so burdened with my student loan debts, I never have felt debt free after bk anyway. Not having a car payment would not make me feel any more debt free than having one, so I chose, to get a new, reliable car. I do keep my cars for 7-10 years so it all works out.

[LSUTiger32]

I really do see your point LSU, and its a good point if you have a tolerance for older cars. By "Four $2,500 cars", I meant that $2,500 cars are pretty much disposable and you will have to buy four of them in the time period a $10k car would last. This is debatable I know, and ymmv. I have no tolerance for older cars, and cannot even safely drive one in the Midwest winters, so the $400 a year that I am paying the bank in interest for my loan is well worth the convenience to me. Plus.....the chance that a $2,500 car will need a $400 repair in the course of a year is very high. It may be that you end up paying more in repairs on that $2,500 car than the $400 you would have paid in interest to the bank for a newer car. You have been lucky with your beaters, but there are a lot of people who end up with $1,600 in repairs on a $2,500 car. Ymmv.

I hear ya, and with the lower amounts like I said I really can understand. Also, I remember you saying that you drive yours for like 10 years so that's understandable as well. The more we talk, the more I think we have more in common than we think.

To me it's also a perception right now. I just don't want to owe anyone anything after what I went through since August of 2005.

[backtoschool]

Huh? Who would buy 4 cars? I buy one car and that makes it different. I did not buy a $10K cash car at first....I am working towards that. That's not a very fair comparison, since I can't drive 4 cars at once. Yes, you have to save up to buy it, but you do it progressively.....or I do anyway.

If you want to compare a $10K car loan to a $10K cash purchase then it is obviously the interest savings. On a $10K car loan for 5 years at 6% interest you save $1,600. You also save the worry of the repo man coming in the middle of the night if something goes wrong and you can't make the payments. As you get lower, to say a $5,000 car loan.....we then the differences are few. You are not likely to default on a such a small payment unless you just don't care and the interest savings over a 3 year loan even at 10% would be only about $750. Still, why pay a bank $750???? Even though I rather save $750, I could see financing a small car loan if you need something to drive today.

I really do see your point LSU, and its a good point if you have a tolerance for older cars. By "Four $2,500 cars", I meant that $2,500 cars are pretty much disposable and you will have to buy four of them in the time period a $10k car would last. This is debatable I know, and ymmv. I have no tolerance for older cars, and cannot even safely drive one in the Midwest winters, so the $400 a year that I am paying the bank in interest for my loan is well worth the convenience to me. Plus.....the chance that a $2,500 car will need a $400 repair in the course of a year is very high. It may be that you end up paying more in repairs on that $2,500 car than the $400 you would have paid in interest to the bank for a newer car. You have been lucky with your beaters, but there are a lot of people who end up with $1,600 in repairs on a $2,500 car. Ymmv.