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  #21 (permalink)  
Old 05-16-2017, 08:21 AM
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Someone can absolutely get themselves into trouble if they use it the wrong way, but that is going to be THEIR choice. I speak with them about how much the can save in interest, repair their credit, and pay off their debt obligations faster.
I agree with all of this.

I think the reason most of us are pushing back against this is because when you're dealing with someone with a ton of credit card debt, you're typically (not always, but usually) dealing with a person who doesn't know how to properly manage their finances. The likelihood of this car loan transforming their behavior is rather low. The likelihood of them seeing their paid off credit cards as an invitation to go to the mall is relatively high. I'm sure there are exceptions but I'd guess that the majority who do this don't greatly improve their situation in the long run.

One of my favorite financial sayings is "you can't borrow your way out of debt."
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Old 05-16-2017, 08:33 AM
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I started June 2008 so I picked an interesting time to join a financial institution.

Trust me, I'm conservative as well. I've never paid a single penny in credit card or personal loan interest. The only car loan I've ever had was for $6000 @ 1.9%. I put over 20% down on my condo.

I don't say this to pat myself on the back. I say this because the only reason I posted this idea is to help and I wouldn't suggest something insanely risky. Someone can absolutely get themselves into trouble if they use it the wrong way, but that is going to be THEIR choice. I speak with them about how much the can save in interest, repair their credit, and pay off their debt obligations faster.
Wow, that is a heck of a time to start.

Did your institution continue to offer these loans during 08/09 or was anything else changed during that time? Just curious, I have read a lot of books and watched a lot of movies about what went down during that time but like to hear individual perspectives.

I do agree with you on the math but have the same concerns as disneysteve laid out above on the follow through of the individual.
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Old 05-16-2017, 08:51 AM
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Wow, that is a heck of a time to start.

Did your institution continue to offer these loans during 08/09 or was anything else changed during that time? Just curious, I have read a lot of books and watched a lot of movies about what went down during that time but like to hear individual perspectives.

I do agree with you on the math but have the same concerns as disneysteve laid out above on the follow through of the individual.
It wasn't really a product offering, and truthfully a lot of the personal bankers didn't even know you could do this (THAT is a whole other topic and says a lot about how "financially intelligent" personal bankers really are). All in all it's just categorized as an auto loan. So yeah, I'm sure it was still done. I wasn't in that position at the time though as I was just starting out.

I hear yall on the follow through. I cannot control what they do, but I can at least inform them. I never once had someone come back later and berate me for anything. Quite the opposite, I have plenty of follow up thank you emails. It really does come down to the individual though. My hope is that once they've got the high rate CC knocked out, they NEVER want to go back. It would be naive to assume that is going to happen 100% of the time though.

Also, it's not ALWAYS designated to CC's. I helped people pay off higher rate personal loans as well. There was one guy who made good money, paid off his travel rewards CC in full every month, but he had to pay $30K for a new roof. If I remember correctly it was something like a 7 to 10 year term @ 7%. He owned multiple cars free and clear and one of them was a fairly new F350. So I told him about it, he went down to the 1.5% and saved something close to $10K. Just gotta look at something from all the angles.
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Old 05-16-2017, 09:03 AM
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Also, it's not ALWAYS designated to CC's. I helped people pay off higher rate personal loans as well. There was one guy who made good money, paid off his travel rewards CC in full every month, but he had to pay $30K for a new roof. If I remember correctly it was something like a 7 to 10 year term @ 7%. He owned multiple cars free and clear and one of them was a fairly new F350. So I told him about it, he went down to the 1.5% and saved something close to $10K. Just gotta look at something from all the angles.
I've got no problem with that at all. When you have a customer who has his act together and a deal like this will save him money and/or get him debt free quicker, I'm all in favor.

I've actually done something similar myself. We took out a home equity loan years ago which we used to pay off a chunk of my student loans and a car. It lowered our interest rate and saved us a bunch of money on interest. We were very fiscally responsible and knew exactly what we were doing and how to best take advantage of the opportunity. Nothing at all wrong with learning how to play the game to your benefit.
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Old 05-16-2017, 05:44 PM
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When I saw this discussion, my first thought was they sure don't buy cars like we do. My car loan was paid in full a few months ago. The car itself is around 10 years old plus or minus. Who would give a loan on a car that old? They would be nuts to. We were so glad to get it paid off, the last thing we would do is take out a loan on it.
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Old 05-18-2017, 08:41 AM
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When I saw this discussion, my first thought was they sure don't buy cars like we do. My car loan was paid in full a few months ago. The car itself is around 10 years old plus or minus. Who would give a loan on a car that old? They would be nuts to. We were so glad to get it paid off, the last thing we would do is take out a loan on it.
Totally agree with the benefits of paying your car off. My only thing is if you already HAVE debt ant it's charging you interest- wouldn't you want to get it at the lowest interest rate possible?

But again, I hear you on the paid off part. My car is 9 years old but only has 59K miles on it. Driving that thing until the wheels fall off!
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Old 05-18-2017, 09:13 AM
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My only thing is if you already HAVE debt ant it's charging you interest- wouldn't you want to get it at the lowest interest rate possible?
From a purely mathematical standpoint yes, but you can't ignore the risk side of the equation. Having a car loan carries different risk than having credit card debt. Secured vs. unsecured debt.
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Old 05-18-2017, 12:40 PM
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^^ And it's not like because you offloaded 10k of credit card debt onto your vehicle loan, your credit card limits are now 10k less. So there's the risk of compounding your problems
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Old 05-18-2017, 07:19 PM
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Totally agree with the benefits of paying your car off. My only thing is if you already HAVE debt ant it's charging you interest- wouldn't you want to get it at the lowest interest rate possible?

But again, I hear you on the paid off part. My car is 9 years old but only has 59K miles on it. Driving that thing until the wheels fall off!
The last thing we would ever do is dump any other loan onto our car loan. I can't remember what the interest rate was, but certainly not good enough to pile it on a car that the minute we drove it away it could be totaled.

I don't worry about the wheels falling off, but the rust eating it up! We only drive about 3-4000 miles a year, so if the rust doesn't get it, it should last us a good long time. And almost all of those miles are tax deductible ones, either for business or medical. 15 years ago I was filling the tank every 4-5 days and driving around 1000 miles a month. My life has changed - a lot.
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