Free Financial Advice

Financial Questions from Our Visitors - Page 5

The examples below are from some of the visitors to Free Financial Advice. The questions below mostly represent word for word the questions asked by the visitors (sometimes including bad punctuation and spelling), but occasionally the questions will be edited on this page. And even though these people have shared their personal finances with Free Financial Advice, we have stripped out any names or other personal information to protect their identity. If you see one of your questions on this page and it makes you uncomfortable, please contact us and we will remove it immediately. Also, please note that any advice or suggestions made from this site are only suggestions and should not be deemed as professional, legal advice. Please see our disclaimer for more information. I apologize for continually mentioning our disclaimer, but this is a very litigious world that we live in.

Question:

We have a life insurance policy with Prudential Ins. We received a letter saying that we have 31 shares of Prudential stock and advising us to buy 69 more to bring our total to 100 shares. How do I know if this is a good thing to do? thank you.

p.s. We are a retired couple - our income and assets puts us on the low side of the tax scale.

Response:

Here is my advice:

Don't buy ANYTHING you don't want to buy and don't feel obligated to buy anything from Prudential. After all, it is their insurance policy; of course they are going to tell you to buy their stock.

With that said, there may be an advantage to you if you did buy the stock. For example, if your insurance contract stipulates that they will only hold stock for you in even lots (lots of 100). If that is the case, then your option may be to buy 69 shares or to have to sell the 31 shares. Even if this is the case, you still don't need to buy the extra shares of Prudential stock.

Decide for yourself what you want to do and, if you have money to invest and want to buy the stock, then it is a good investment.

Question:

My name is Tracy and I'm desperately trying to clean up my credit. I'm 34 years old and don't know that much about finance and credit. I have one credit card that I can't transfer or lower the rate - It's a CITI Bank card - (mastercard) which I had a bit of trouble in the past trying to pay it off. They (Citibank) closed the account which I didn't even know about. I haven't even tried to use it for years - over 6-7 - I'm just trying to pay off the balance and GET RID OF IT! - It's about 4,000 now - but it's over 18% - and they won't lower the rate.

I've set up automatic bill paying through my bank - and have been on time for 7 months now - But still no help from them. I've tried to apply for other cards - just to transfer the balance - but I keep getting denied.... Uhhhg?! - I just don't know where to turn? I've even tried getting a loan from my bank -- no dice -- Is there any hope??

On top of that - I've been trying to get a copy of my credit report - But all the sites tack on a "trial membership" of some junk that I don't want to be responsible for. I've heard that once a year - and especially after you're rejected for credit - that you're entitled to a free report?

I'm truly hoping you can help or maybe point me to a sight that can - I'm afraid of credit counseling - I don't know if that damages your report even more?

Response:

It sounds like Citibank isn't helping you at all and because of all the late payments reported by them to the credit agency, you are going to have a difficult time getting any credit to pay off the CITI card. According to your email, it sounds like you really have three questions. I'll try to answer them, or at least give some guidance below:

1 - How do you clean up your credit? The best, and often only way to clean up your credit is by not making any more late payments. What was probably happening with Citibank was that while you were struggling to make payments to your credit card, they were penalizing your credit report each time a payment was late. Unfortunately, a late payment typically stays on your credit report for 5 - 7 years, so until you have no late payments for that period, your credit will remain flawed. With that said, there are still a lot of ways to improve your credit. I do not specialize in this process, but some of the links from my site's credit page may be able to help you. The most important thing is that you don't get any more bad marks against you. The second most important thing is for you to continue to use credit, since it will add to your track record. In fact, you may want to get a secured credit card (for people with bad credit), use it to make small purchases, and then pay the balance off in full each month. This will help rebuild your credit faster than if you didn't use any credit at all.

2 - How do you pay off your credit card or at least lower your interest rate? This question may be tougher. You have several options, I'll list the two best here: First, if you own a home, it is by far the best option for you to take out a home equity loan to pay off the debt. This will result in a lower interest rate and a tax deduction. Second, if you don't have any equity to borrow against (no home or no equity in your home), then you can try to get Citibank to lower your interest rate. If you cannot do this on your own, you should hire a debt services company (like the ones listed on my site) to negotiate your debt with the lender. They will not only be likely to lower your interest rate, but they can probably even reduce the amount of debt by a fair amount. And even though this will hurt your credit, it will not really matter much since your credit is already flawed.

3 - How can you get a copy of your credit report? To get a copy of your credit report, you can go to any of the three credit bureaus (Experian, Equifax or TransUnion). They each charge about $10 per report. If you want to order a report that covers all three bureaus (they often differ), you can do so at one of the credit companies listed on my site. Some of them offer them for free if you sign up for their service or you can pay about $30 to get one free and clear. Although there are some cases whereby you have rights to see a credit report without cost, I'm not sure of how to do this.

Question:

I have a question:

My wife and I are looking for a loan for three reasons in this priority:

I want to return to school at the university level. Which, as a second degree seeking student, will cost approximately $5,000.

We want to consolidate our $15,000 in credit card debt which averages at 17.6%

We want to remodel our kitchen at a cost of no more than $9,000.

We currently have $79,500 in home equity. We've owned this house for seven years. My wife earns $42,000 per year. I have left my full-time job to pursue my education; I work part-time earning $10,000 per year. We just re-financed our home earlier this year (March 2002) and moved our adjustable rate to a fixed rate at 6.5% for 15 years. We paid approximately $3,100 in closing costs at the time. We always did, and continue to pay an extra mortgage payment a year toward our principle. We have always paid against the principle on our credit cards as well.

What loan is best for us? My wife and I are interested in a Home Equity Line of Credit instead of a traditional home equity loan because of our re-finance this year. We wouldn't need ALL of the money right away and don't want to pay interest on monies not used. Our mortgage company's finance division has offered us a no closing costs/no prepay penalty/$40,000 home equity line of credit at 13.9%.

I think the interest rate is high, but it IS better than the 17.6% average we are paying on credit cards now. They won't budge from that interest rate because of no closing costs and our bankruptcy of six years ago. Even though I am not working full-time right now, our credit is manageable for us now and, despite the bankruptcy of years past, I have worked hard to sustain a decent credit score, which is 659. Our finance company said that, upon our good graces of one year, we my ask for a lower interest rate on this loan and will probably receive it. My wife and I are aware of the risks involved. We know that we are not eliminating debt with this loan, we are just exchanging this debt for another to save us $300.00 per month. This savings will allow us to pay our credit card debt off faster and more efficiently....and we are determined to do so. We realize that you are swamped with inquiries, but we would appreciate any advice you have on this matter.

Thank you very much for your time and consideration.

Response:

It sounds like you have a very good understanding of both what you want, and of what type of loan you need. I think you're on the right track but will add a few comments that may help you find the loan you're looking for:

- First, the deal your current mortgage company is offering you does NOT sound like a good deal to me. Besides the fact that they are offering you over $10k more than what you need, the interest rate of 13.9% (plus any fees on the unused LOC) seems too high and they don't seem very flexible.

- Second, you said your bankruptcy was 6 years ago. Assuming it was a Chapter 13 bankruptcy, it should fade off your credit report after 7 years. Realize that your credit will improve dramatically once this happens and use it to negotiate with the lenders that make you an offer.

- Finally, I would search other lenders (besides your current company) for a loan. I recommend using a single service that sends your loan request to hundreds or lenders so that you can find the most competitive loan and loan rate. The problem with using your current mortgage company is that they only have a few products to offer and are not always as flexible as another lender may be. By having many lenders look at your loan information (don't worry, they don't see your name and phone number), you are often able to find someone that specializes in the specific loan you are looking for and that can offer you a better rate. If this type of service doesn't appeal to you, you can go to another direct lender to get them to compete against your current offer. I have some links on my site to all of these types of companies at http://www.free-financial-advice.net/loans.html

Question:

I am overwhelmed by credit card debt and car payment. My husband is retired and has a mo. income of appx. $1200 per month. I bring home appx. $1600 per month. Following is our current obligations;

Home - none - paid in full - Doublewide mobile home appx 5 years old in a nice neighborhood on our own lot.

Car - recently purchased $25,000.00 - $430.00 per month at 7.8% interest for 6 years.

Truck - lease plan with 1 1/2 years to go at $300.00 per month - may purchase truck at end of lease for $12,000.00.

Credit card #1 - $5,000.00 at 12.99% - pay about $100.00 per month

Credit card #2 - $5,000.00 at 8.9% - pay about $100.00 per month

Credit card #3 - $1,000.00 at 21.99% - pay about $100.00 per month

Credit card #4 - $2,000.00 at 21.99% - pay about $100.00 per month

With utilities and other living expenses we are struggling. When our home was mortgaged we paid about $5,000.00 a year in interest and was not able to use this amount as a tax deduction. Somehow it wasn't enough. I have a 401-k at work but only have $5600.00 dollars there. I am 59 1/2 now and don't want to work full time due to some minor health problems.

What are your suggestions?

Response:

I am sorry to hear of your predicament. I have some advice for you and a few options that you may want to look into. I am going to be as honest as as possible, so please don't take anything I say in a negative way.

- First of all, the car you recently purchased accounts for twice as much debt as all of your credit cards combined. If you are serious about getting out of debt, you should probably sell your car and purchase a much less expensive car (maybe in the $3-10k range). The same holds true for the truck that are leasing. When it's lease is due (or earlier if the penalties are low), instead of buying the leased truck, you could buy a used truck for half of the cost and cut your payment in half.

- Second, if you are interested in lowering your credit card payments (and interest rate), you could take out a loan against your home that would consolidate all of the loans into one monthly payment. If your credit is decent, the interest rate should be lower than what you are currently paying, and because the loans would be consolidated, your monthly payment would be less than the $400 per month you are paying now (for example, your car loan is for $25k and it's monthly payment is only $30 per month more than your total credit card payments of $400).

- Third, there are probably lots of ways to reduce your monthly living expenses. Find ways to save money and every dollar you save will help you pay down the debt faster. I have a page on my site that recommends lots of ways to save money. Saving money also means spending less money. Look closely at where all of your monthly income is spent to find spending that you can reduce or eliminate.

Question:

My company moved out of town in 1995 and I retired, at that time I rolled my 401k over into an insurance annuity. I made the mistake of trusting my insurance agent (a person whom I thought was my friend) and did not read the fine print, I later found out that I have to leave my money in there for 12 years or pay a large penalty for taking it out early. I will be turning 59 1/2 in January and would like to have access to my money. My question is: Is there any way I can get my money out early without paying this penalty?

Response:

There are two types of penalties on early withdrawals from retirement accounts: One type is mandated by federal law (as in 401ks, 403bs, etc). The other type is monitored by your individual insurance policy. It sounds like this penalty is in the fine print of you insurance policy. If that's the case, I would recommend reading all of the fine print and seeing if there are any exceptions to the early withdrawal penalty that you could qualify for. If you can't find any, contact the insurance company's customer service department and try to work something out with them. They should be open to negotiation (but it probably won't be easy to negotiate). They may be able to waive the fee (or at least part of it) or you may be able to roll the annuity back into a 401k account, whereby you'd have access to it without a penalty.