Thursday, April 10, 2014

Is it debt free or the highway?

The car loan process is really going a lot slower than I anticipated, perhaps because my brother can only sneak a call at 4am on Fridays or a few minutes during the weekend (when I am working, it appears, so no go).

This made me think of something... ok, most of you know how I feel about credit cards. Sucks big time to pay interest, but can be managed to your advantage. Student loans suck as well, no excuse there. Actually, most debts suck. And some will say that ALL debts suck, no exception. I tend to be of the disagreeing type. I believe debt is a dangerous tool, like a double edged sword with little hilt to grab onto, and if you hold it the wrong way or swing it the wrong way, it will either cut you or cut something/someone else. Makes sense?

So why would I be actually OK with getting this car loan? It IS debt, don't get me wrong. It is money I will owe someone else for about 32 months, and paying them up to $10/mo on top of the borrowed amount just for the privilege of using that money now vs saving it and using it later. Look, I wont try the whole "but let me justify this!". Debt is debt is debt. But it is always as bad as something worth burning at the stake? Is it really reasonable for the average person to bypass some debts?

When I started this journey, I never planned to get a car. That's actually something I started after my little car died in 2011. The car I loved and thought would last me forever, but didn't. I did intend to buy a house eventually, and financing was and is my primary choice. Perhaps my only one at this point. But a car loan? Sure, I could go and get a car, though from what I'd see, I couldn't find anything lower than $9.5k with my very low standard requirements. So though I do have $4k saved, I still need some to complete it. The situation under which I am buying the current car is personal/family, and it's not just those two, but also makes financial good sense. Not BEST sense, but good sense.

In summary, yeah, I am alright getting a loan for the car. I think anything that I can do to protect or improve my 5 basic needs (food, shelter, safety, health, transportation) is worth reconsidering. And since I was going to buy a $10k car anyway, may as well help rebuild some family relations, because let's be honest, it sucks being on your own with such a large family.

On your family, is it debt free or no deal, no exceptions?

10 comments:

  1. Think of debt as a tool. We borrowed 27,000 to buy our suv, we paid on it for 5 years, it has been paid off for 2 and hopefully when I sell it I can get 10,000 back... It was a brand new car and money back after a few years or we could keep it.

    HS

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    1. Yeah, with my current car, I'll probably drive it until it starts dying or dies entirely, so it's not a loan for 32mo, but a loan for an asset that hopefully lasts me 7+ years.

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  2. We spent several years climbing out of debt, a few more years of completely debt and credit card free, and now we have a mortgage and use our credit cards for everything possible for rewards, paying them off in full each week. I have had two car loans in the last 5 years, both at 0%, and both paid off at or around the 6 month mark. I had the cash available to pay for a car but chose the 0% financing option, only to decide that I hate having debt and not owning my car when I have the cash available. But that's just me. I have no issues with responsible use of credit. Me personally, I have anxiety about our abilitiy to maintain responsible use of credit in the event unemployment happens. I've recently faced that reality and know we would have been okay, but I was already reevaluating our spending and the survival budget.

    DH and I are in a much better and financially secure place than we were during our debt repayment years. Our income is good, mortage debt only, aggressively saving for retirement and other goals. Still, I keep a close eye on our spending and how we utilize the money we do have, something we learned during the painful debt years when struggle and sacrifice and feeling trapped by our poor choices ruled our lives. Getting out of debt the way we did was the right choice for us, and to us personal finance remains just that, personal. I am a huge admirer of your commitment and consistency in your debt-free pursuits and the way you weigh the consequences of your present day choices against your longer-term goals. Because of that, whatever you decide to do about this car and loan will be the right choice for you from the options available.

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    1. Thanks a lot for the kind words! I too hate having a monthly bill come in every day for something... like student loans, or when I had credit card debt. I just don't understand why I am ok with my car loan and not other debts. I agree, debt can become dangerous, and since I've never really been in debt on my own (as in, created my own debts--my current and past ones were thanks to my mother), I can only prepare for the worst if my time comes when my EF wont be enough to handle a downfall... I guess that's why I need to up my EF to avoid damage as much as I can.

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  3. no, we are not debt free or no deal kinda people. There is just too much coming up in the future where it's a possibility to be debt free. For example, we will most liekly need to buy a car at the end of this year. We could pay cash for all of it, but then we would have no liquid cash left, and we want to be able to buy a house in the next few years as well. We ARE gonna try and keep costs as low as possible on the car, plus trade in one of our own, hopefully the loan won't be anything too big.

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    1. I agree! I see this loan also as a credit score increase, since all I've had is student loans and credit cards. With the addition of the loan, I expect the scores to go up some, in preparation for whenever I opt to buy a house in the after-5 year range.

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  4. I think your head is in a good place now making it an acceptable time to take out a needed loan. Sometimes, there just isn't a choice. Well, there is, but it's not black and white. You weigh the pros and cons and go with what is right for you. Hearing you say you are considering a car loan doesn't worry me half as much as it would if others said the same thing.

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  5. I think the safety of where you live, what you drive and who you go around with are the three most important guides in your life. I agree your in a good place to take out the loan and I think that having a car that is safe and dependable is really important. Besides if you take good care of it(which I know you will) you could drive it for many years.

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  6. In my family we had "The Bank of Dad" ! He would loan us money when we needed it at 0% interest and with flexible repayment plans. If we didn't pay him back though it would come out of our inheritance! No one ever abused this privilege as those were the years when interest rates were over 10%.
    For you a car is a necessity not a "want". There is nothing wrong with having a car loan and since you have a large down payment (most people don't have a down payment at all!) so you are way ahead of the pack!

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  7. University life can be very monotonous. That's why going out with friends is quite a relaxing experience. Though I'd certainly won't spend any of my loan on a night out. I'm sure you'd rather spend it on more important things. Remember, the loan would have to be paid in the future. But I could probably make an exception to these pretty plates!
    Ralph S @ Loans for Less

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