Consumers defaulting on their loans
- Pinky
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- JGibbs
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Thank you for opening up about this because it makes perfect sense! My school loans get sold and I hate that too. Often my payments are "lost" but I've always had my confirmation number and proof that I've paid at the ready. It takes up a lot of unnecessary time and there is too much room for error.Wanderer wrote: In truth, I did not fully understand the FHA ARM Mortgage. It looked good because it had lower starting payments and in my mind wages would increase enough to stay even with the monthly payment requirements. It was a tough way to learn I did NOT know what I was doing!
- Wanderer
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- JGibbs
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Wanderer, how did the bank get you to agree to those terms? Did you know what it meant at the time? It isn't polite for me to ask and I understand if you don't want to answer. I know that plenty of intelligent, rational, cautious, thrifty borrowers agreed to terrible terms so something had to happen to make it seem okay. I don't believe that many people were too stupid to read their paperwork before signing, which is the common answer you hear from some people who try to justify the disaster faced by many Americans.Wanderer wrote: Tough call as you need the roof over your head, food on the table and a means of transportation to go to work in many communities. See your point on overwhelming and follow the concept of the house first. Some of the decisions are personal and very specific to a person's financial status at the time. If you got into one of those questionable mortgages of the early 2000's then it is hard to stay in the house. I got into an FHA ARM that increased 7.5% a year for five years (did not know any better) and had to sell and get out. My wage increases did not come anywhere close to the mortgage and little did I realize the mortgage was only to get the first payments low enough to get me in the door where it almost broke me (fortunate to sell the house for cash and get out).
- FrankN
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- Lexie
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- CentsibleSaver
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Both vehicles and houses come with additional lifetime fees, but it's significantly more expensive to own a home, especially when you add in the yearly tax fees. possible HOA fees, and insurance. You have to do yard maintenance which often requires fuel and oil. And if something goes wrong, you likely can't afford to fix it. Home ownership in, general, takes up a good amount of time. You can live in the home for quite awhile before the foreclosure process is finished. During that time you can hustle and save as much money as possible to fall back on.
On the other hand with a car, you're paying gas, maintenance, insurance, and other possible fees but the bills aren't as large and don't all hit at one time. A car will get you to work and can take you to food pantries, employment agencies, educational programs, libraries, and other resources that can help. You can live in your car if necessary. Car maintenance doesn't take up much time plus, you're more likely to work out a deal with a local mechanic or friend than you are with a bank. The consequences of missing a car payment hits quickly as dealerships have installed kill devices to make the car unusable. Unlike a home foreclosure, the repo process comes swiftly and consumers have few protections.
- Tishbel
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I'd also suggest that they pay down any which don't have early repayment penalties. Furniture loans and the like can really hammer people who pay them off early.FrankN wrote: If you cannot lower you interest rates, I would still recommend to pay the balances with the highest rates first (or small balance items).
- FrankN
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- Goldbug
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I know many people focus on clearing the credit cards first because they have a higher interest rate, sometimes ten times as high as a mortgage so they will build up quickly if they are aren't completely clear. The problem is that unlike secured debt, it is easily written off or marked down. If you are tackling debt it makes sense to restructure first to get the interest rates as low as possible, particularly with credit cards. Otherwise you're paying more than you have to.
- FrankN
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- MikeJ
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- FrankN
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- patse
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Cents wrote: In a situation where they're forced to choose, I can see why people would tackle credit cards and car loans before worrying about the house. The house may seem like insurmountable debt and the car and credit cards may be more manageable. Also, the house isn't going to do you much good if you can't buy food or get to work. Better to pay off the smaller stuff, stay with family or friends for a while, and get back on your feet with a vehicle and some credit intact.
I agree with your way of thinking on this one. Their credit card bills are probably a lot lower than their home mortgage. What they need to know though is that if they lose their house, their credit score will tank and those credit cards will go away (once they are paid off).
- Wanderer
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