Many, many moons ago, NCN and I had a discussion on credit.  We definitely have differences in opinion on this topic, but it’s always a great debate.  NCN has a new post that’s worth a second look.

I don’t think debt is enslaving, after all you control the keys to getting out of debt. Debt is a good thing, if managed properly. It’s sort of like the argument on diet…moderation is the key. Properly used, debt can boost your bottom line. What do you think?

I might be missing something obvious.  The more I read other PF Blogs, the more I think about why people choose to be in debt when they don’t have to.  Excluding folks that have financial burdens that force them to be in debt to accomplish a goal and purchasing a home, why would you choose the debt route?  If you read PF materials or are a PF Blogger, it’s obvious that you have at least a fairly good grasp of finances, so why choose debt?  Especially unmanageable debt.

I see folks signing up for loans at rates greater than 10% even though they are fully aware of their financial standings.  Is it because they are keeping up with the Jones’?  Is it because of financial ignorance during the younger years?  Or even older years?

Read the rest of this entry »

First off, I commend and respect NCN’s stance on refusing credit. The principle is good, and I agree many people in today’s society are often in over their heads in debt. But putting all formlities aside and being honest, that is the individual’s fault, and no one else’s fault but their own. There are circumstances where I believe the decision to go into debt might have been extremely difficult, and I’m in no way trying to put that lightly. I believe that some honest hardworking people who are trying to now pay down their debt are “in over their heads,” and I hope the support and help is there to help them get out. I’m not being insensitive, just stating the truth.

Now if a creditor took advantage of people by using confusing terms, tricks, lying, etc. that is a whole different story, and not one I’ll get into.

I believe there’s a basic fault in the premise that having credit equals being someone else’s slave, because as people, we all owe someone something, regardless of how much we think we made it on our own. I’m not talking just money here obviously, could be time and labor to help move, could be someone looking after your shopping cart while you went to find your kid, could be anything. My point is just because you owe someone something does not make you their slave. I sometimes pick up the tab for lunch or dinner for my friend knowing that later down the line they will do the same. I don’t think of them as slaves, and if I happen to pick up another tab before they do, I don’t count. If that is the case then, you my friend, need to find new friends.

Here’s a statement I have a problem with:

I’m pretty radical. I refuse to borrow money. I will not borrow money from anyone, not even a friend or a relative. I will humbly accept money as a gift, or proudly take money as salary for a job that I have done, but I will not borrow money. I will not borrow money for a car, for a house, for a boat, for a sandwich. I will not borrow money…

Why?

Because, I refuse to be anyone’s slave…

But come on, borrowing money for a sandwhich equals being a slave? That definitely is a little too radical for me.

I will not bow down to the gods of CitiBank or Bank of America or Ford Motor Credit. I do not care how they “reward” me, entice me, trick me, or invite me. I will not be seduced by their promises and their plans for my future. I have a brain of my own. No amount of “cash back” is worth giving up my freedom. 

CitiBank, BofA, and Ford Motor Credit are FAR from gods. The foundation of freedom in America runs much too deep for even the hands of CitiBank to dig up.

Well, I went and got pre-qualified. It was really just an informal sitdown session, where we looked over the numbers and exchanged ideas and questions. She punched my numbers in and gave me an idea of what I could borrow and the payments I should expect. It was a very painless process and took only about 30 mins, but I got a lot of information from it.

So now to look for a house…A year down the line, I don’t know why I’m already looking! This is just going to get me in trouble…

So I’ve decided. Sort of. I’m a victim of my own “mental accounting” issues as It’s Just Money describes here. I have fell victim to myself…I feel comfortable knowing that I have money locked away just in case. Just in case of what? My possible but very unlikely house purchase within a year? My possible decision to invest a large amount of money in stocks? Maybe the economy will collapse and suddenly having “cash” will be a good thing. I should change my blog name to Financial Crazies.

Thanks to readers, who voted 7 to 4 in favor of paying off my loan, I’ve decided what I’m going to do in regards to my car loan. I’m going to pay off at least half. I’m still not sure if I want to pay off the whole loan. Hopefully my loan payment will be reflected by my next net worth update.

Poll Closed. Thanks!
I just got an interesting comment from Think, and I’ve thought about it, but always felt content in knowing I’m not making or losing money with my loan, I just have extra cash in my pocket. This was enough reason for me to really keep the loan alive…but should I pay it off?

Wow, I just decided to go all out on a 0% Balance Transfer offer, and it went through. Well, I actually asked for $25,000, but looks like I could only get $21,500 approved…But wow! I didn’t expect that much.

Chase sent me 3 offers, one in December, one in January, and then one in February. Each extending the 0% for up to 15 months! No balance transfer fees. So with the offer in February, I took it. I requested $25k transferred to my Citi card, where I then requested a check for the balance. I always transfer to another credit card from a different company. Why? I don’t know actually…I guess first of all, I don’t want them to tell me I didn’t do a “balance transfer” and second, if it’s another company, they can’t see if I really have a balance.

Hopefully by my next net worth update, I’ll have the cash sitting in one of my accounts…What can I do with $21,500 for 15 months…hmmmmm.

Just read an interesting article on IRAs, and in it, I happened to stumble over an excerpt that caught my eye:

Using an IRA Rollover As a Short-Term Borrowing Source
Every so often you may face a temporary cash crunch when you desperately need some extra dough, but just for a short time. You will have the necessary cash in a month or so, but that doesn’t help right now. A potential solution is “borrowing” from your IRA account, which can be done with virtually zero paperwork, no delays from balky loan officers, and no interest charge.

You simply withdraw the needed funds and make sure you then replace the money within 60 days. You are considered to have made a tax-free IRA rollover.

The money can be deposited back into the same IRA account it came from or into a different account, but each account can receive only one of these rollover deposits during any 365-day period. (”Direct” or “trustee-to-trustee” rollovers from another IRA into the account in question don’t count for purposes of the one-year waiting period rule, nor do rollovers of distributions from qualified retirement plans.) But remember: If these guidelines are violated, you are considered to have made a taxable IRA withdrawal, and you may owe the 10% premature withdrawal penalty.

Kind of an interesting proposition. If you need cash for a few days, this would be a legitimate option…and you can do it once a year. Seems a little fishy to me though. Is it legal? Yes. Is it abusing the purpose of a rollover? I dunno.