Question for Post BK people

[anniea4001]

@Horseshoez  you are correct, any car can break. New or old. 

Now, the difference is that newer cars usually have warranties that cover all or most or repair costs. In some cases you even get a loaner to drive around while your car is in the shop.

Old or new, all vehicles need maintance and care. There is no discussion there. So regardless of the age of the car, you will need to invest some money in it. Even if it is just tires and oil changes. 

I got nothing against older vehicles. There are some out there that still kicking strong but sometimes it is better to replace things before they break. Or at least be ready for when the time comes. After all, nothing lasts forever. 

[kr43002]

I believe this thread has gone off track a bit.

I understand both sides to the argument, every car will have maitaince needs so getting a loan on a car is just a vacuum for wealth. HOWEVER, purchasing a newer car can help decrease the repair and fuel expenses by basically wrapping it up in the loan. My cheap beater car will need replaced when I am more stable and have enough cash to be reasonable able to loose my job and still pay my bills for 6 months from savings. I am going to be honest, for the best credit score a loan is required. It can be just as cheap wrapping up money in a car loan as it is wrapping it up in a secured loan.

HOWEVER, I am not ever going to buy a "700/month" car or a 72 month loan. IF i do end up purchasing a vehicle via loan, it will be a car that I am in love with and that I don't intend on replacing for the next decade, which nothing new can fit within the not 72 month or 700/month payment catagory.

I do appreciate the viewpoints that have been presented. I understand both sides and appreciate your inputs. 

[jmw1]

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@Horseshoez wrote:

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@jmw1 wrote:

Do not ever get an auto loan. That's one of the best ways to be broke for the rest of your life.  Each car could be $700/month for 84 months to a bank instead of your savings account. No student loans ever. The only borrowing you should ever do is the mortgage. 

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Speaking strictly for myself, that is bad advice.  Why would I take money out of investments to pay cash for a car when I can borrow the money for stupid low interest and let my money continue working for me?

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Invest in what?  Crypto?  Stocks? S&P 500? Gamestop or WSB?

The best risk-free investments without early withdrawal penalties pays about 0.5% today. That's $50/year per $10k money "working for you" at 0% APR. Basically pocket lint while your DTI is -$750 which could cost you big money on a mortgage someday.  Some lenders will think you will simply finance another car right after closing (everyone needs a car) so they won't remove the -$750 0% APR unless you were organically close to payoff.  When auto loan amounts start to get high, it also suggests you are wasting too much money on a car by eating the big initial depreciation.

Just pay cash for your cars and favor junkers.  Even if 0% is offered.

[Horseshoez]

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@jmw1 wrote:

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@Horseshoez wrote:

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@jmw1 wrote:

Do not ever get an auto loan. That's one of the best ways to be broke for the rest of your life.  Each car could be $700/month for 84 months to a bank instead of your savings account. No student loans ever. The only borrowing you should ever do is the mortgage. 

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Speaking strictly for myself, that is bad advice.  Why would I take money out of investments to pay cash for a car when I can borrow the money for stupid low interest and let my money continue working for me?

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Invest in what?  Crypto?  Stocks? S&P 500? Gamestop or WSB?

The best risk-free investments without early withdrawal penalties pays about 0.5% today. That's $50/year per $10k money "working for you" at 0% APR. Basically pocket lint while your DTI is -$750 which could cost you big money on a mortgage someday.  Some lenders will think you will simply finance another car right after closing (everyone needs a car) so they won't remove the -$750 0% APR unless you were organically close to payoff.  When auto loan amounts start to get high, it also suggests you are wasting too much money on a car by eating the big initial depreciation.

Just pay cash for your cars and favor junkers.  Even if 0% is offered.

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While I have no idea what you just tried to say, the fact is quite simple, if I want to buy, say, a $36,000 car, new or used is irrelevant, I could either take that money from my investments, which over the last decade have yielded at least 10% for nine of those years, or I could borrow the money for little to no interest.  Spin it any way you want, I will have more money overall if I borrow the cost of the car versus pulling it from my investments.

The fact is, credit is a tool, use it correctly and it will make you money, abuse it or don't use it at all, and it will cost you money.

[kr43002]

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@Horseshoez wrote:

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@jmw1 wrote:

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@Horseshoez wrote:

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@jmw1 wrote:

Do not ever get an auto loan. That's one of the best ways to be broke for the rest of your life.  Each car could be $700/month for 84 months to a bank instead of your savings account. No student loans ever. The only borrowing you should ever do is the mortgage. 

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Speaking strictly for myself, that is bad advice.  Why would I take money out of investments to pay cash for a car when I can borrow the money for stupid low interest and let my money continue working for me?

---

Invest in what?  Crypto?  Stocks? S&P 500? Gamestop or WSB?

The best risk-free investments without early withdrawal penalties pays about 0.5% today. That's $50/year per $10k money "working for you" at 0% APR. Basically pocket lint while your DTI is -$750 which could cost you big money on a mortgage someday.  Some lenders will think you will simply finance another car right after closing (everyone needs a car) so they won't remove the -$750 0% APR unless you were organically close to payoff.  When auto loan amounts start to get high, it also suggests you are wasting too much money on a car by eating the big initial depreciation.

Just pay cash for your cars and favor junkers.  Even if 0% is offered.

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While I have no idea what you just tried to say, the fact is quite simple, if I want to buy, say, a $36,000 car, new or used is irrelevant, I could either take that money from my investments, which over the last decade have yielded at least 10% for nine of those years, or I could borrow the money for little to no interest.  Spin it any way you want, I will have more money overall if I borrow the cost of the car versus pulling it from my investments.

The fact is, credit is a tool, use it correctly and it will make you money, abuse it or don't use it at all, and it will cost you money.

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I believe his statement is based on putting your money in a CD or savings account. Which, although safe, is the least effective way of investing money. Using the stock market to save your emergency fund is a bad idea because it is HIGHLY volatile atm, however investing your excess money that you aren't looking to use in the near future, investing in BTC, Doge, mutual funds, even buying nusmismatic coins yeild a higher return. 

It is my personal belief that buying a vehicle can be an investment if done correctly. Example: my 2004 Chevy blazer is expensive on gas and maitaince costs as its an older truck. But on the flip side, the cost of insuring is lower because it doesn't need full coverage. Say I use 50 gallons of fuel a month. thats 160 dollars, or 750 miles (15 mpg average) than I have $90 insurance and $100 maitaince. Total cost is around 350/month

Lets look at my sister Spark. Maitaince was low ($40/month) Gas was cheaper 80/month (30mpg)  and insurance was around 150$. Payment was $160/month bringing the cost to 430. it costs $80 more per month for this vehicle. If I took out the payment and the full coverage, the monthly cost would be $210. A difference of 140 per month. the difference in cost of vehicles is 5,500. Investing the money in that vehicle would net 2.5% return versus investing the $5,500 in the stock market which, using a safe index fund generally yeilds 4-7%. 

However, the blazer is a truck and the spark is a sub-compact car. Both are very different in their own rights, but in general, a $1000 beater versus a $6500 will follow this pattern. 

[Anonymous]

Hi there.  First of all, let me tell you, I was just discharged December '20 so I am well aware of the rollercoaster of shame/relief/etc that you probably have felt/are feeling.  I am now almost 5 months post discharge and I have three cards and am well on my way to rebuilding.  If you want you can take a look at my post from February (the only one I've made) that gives the whole process so far in detail.  I have a Cap One Quicksilver (just upgraded from PLatinum this week actually), a Credit One Platinum (DON'T recommend because I stupidly signed up for a card with a yearly fee to help w/ credit building), and a Cap One Walmart Mastercard (can use anywhere not just Walmart, and I wanted a third card to rebuild.  Currently, I have about $50 on the Quicksilver (Out of $1100 limit) and nothing on either of the other two. 

Before BK, I was a compulsive charger. Everyone is different of course.. But for me what has worked is every time I swipe my credit card (which I am doing frequently to try and build quickly) I IMMEDIATELY transfer that amount of money into my Savings account.  One I hit about $100, I am making the payment.   I am doing 3-4 payments on the credit cards monthly and keeping the balance just barely above zero.  If I make a large purchase like say $500, I am transferring the $500, waiting for it to clear, and paying it immediately.  The most important thing is to treat this like a debit card.  If you have $300 cash but you need to buy something for $500, YOU CAN'T.  This is a "debit card" not a credit card.  

That's honestly working great for me.  My scores have all climbed substantially since discharge and I am hoping to try and see 700 across the board by the time I am 24 months post-discharge or less!  Also, a big benefit is by making several payments monthly on the cards, you will never get slapped with any late payments.  One single late payment will push your rebuild back big time!  Best of luck and please PM me with any questions, I love to help out as much as a I can as I am freshly out of Ch 7 discharge myself.

[dragontears]

@kr43002 

Your idea in the opening post about using a card for a small subscription and cutting up the card is not a bad idea based on your description of your spending habits. 

I  have an out of the box suggestion for you to build a savings account. 

My sister has a similar problem, if she looks at her bank and there is money in it she will go out and spend it. To help her, I opened a savings account in my name and she has a portion of her paycheck into it. Because she has no access to it and can't see the balance she forgets about it for her day to day spending. When she needs the money I just zelle it to her bank account. 

Her savings account is now a healthy amount and that is after she used 10k to pay off a judgment. once she is ready it will make a very nice down payment for a house. 

This method does require a LOT of trust in someone else but if you know someone you can trust this much it might work for you while you are trying to change your spending/saving habits. 

[Horseshoez]

@dragontears, that is quite a good idea; I really like it!

[Guyatthebeach]

kr43002,

My bankruptcy falls off this and I still have a hard time with budgets.  I fully understand where you are coming from. 

I track my budget and credit use on a spreadsheet that I review once a week. I also have reminders set in Outlook to remind a payment is due. It's a system that works me and it did take a while for me to perfect it. I keep my emergency savings at Navy Federal, because NFCU isn't my main financial institution. I use a local credit union, SCSCU, and PNC. 

There is nothing wrong with rebuilding your credit without credit cards. It may be a challenge at first, but it can be done. I have a friend that has a personal line of credit of $10000 for an emergency and a secured Visa with PNC for when she absolutely has to make a credit card purchase, and it works for her. 

If you want a secured card that never graduates to an unsecured card, look at PNC if you have a branch near you. You have to apply in the branch. Also SDFCU has a secured Visa with no FTF's and BT fees that is a true chip and PIN card. They may not have Navy Federal grade customer service, but they have been good to me over the years. 

You can do this. Best of luck to you as you rebuild. 

Guyatthebeach

[jmcmillan]

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@Guyatthebeach wrote:

If you want a secured card that never graduates to an unsecured card, look at PNC if you have a branch near you. You have to apply in the branch. Also SDFCU has a secured Visa with no FTF's and BT fees that is a true chip and PIN card. They may not have Navy Federal grade customer service, but they have been good to me over the years.

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Do you have personal experience with the PNC card? I've seen multiple sources that say this card does not graduate. I'd be interested in hearing more.

I am very impressed with the SDFCU card, it was very easy to get approval. However, I have heard the chip-and-PIN is no longer a thing.