Owe More Than Your Car Is Worth? Here are Your Options

A Facebook fan wanted to know what to do because she’s upside down on her car loan, meaning she owes more than the car is worth. Some people call this having “negative equity.” It’s always tough dealing with being upside down in a car payment because, frankly, there aren’t any really good options. Nevertheless, here is a link to a page on the website of www.LeaseGuide.com, a consumer car leasing guide. It offers of the best explanations you’ll find about your choices when you owe more than your car is worth:

http://www.leaseguide.com/Glossary/upside-down-car-loan.htm

Got a financial question? Ask The Money Coach! Find me on Facebook at www.facebook.com/themoneycoach or on Twitter at @themoneycoach.

5 Tips for How and Where to Save Money

By Lynnette Khalfani-Cox, The Money Coach

We all can take advantage of some money-saving strategies, whether or not we have Financial Deficit Disorder. Whether you want to save money to buy a house, sock away for retirement, college or a rainy day, here are five tips, adapted from my book “Your First Home: The Smart Way to Get It and Keep It,” that will help you slash your expenses.

1. Save on Your Car. There are a lot of expenses involved with having a car: gas, maintenance, insurance, parking, and a monthly payment if you have a loan. To save on gas and parking, you can give up a paid covered parking spot and park for free on the street, or take public transportation into the city to avoid feeding quarters in a meter or shelling out cash at a garage. To save on car insurance, opt for a higher deductible in exchange for 10% to 25% off your annual premiums, or ask your insurer about good driver discounts, discounts for having an alarm system, or lower rates for taking a defensive driving course. You can even save on your car loan by refinancing it, just as one might a mortgage, but without the closing costs. Try Capital One Auto Finance, which offers refinances in 15 minutes.
2. Save Money on Food. I know you already know you can save money if you went to fast food or sit-down restaurants less often, but you can also save money by keeping those loose coins in your pocket. Stop making daily runs for coffee or ice tea, or even donuts or a bagel before work. (You can buy a whole bag of bagels from the grocery store for the cost of just one bagel at some delis, so why not just grab one out of your cupboard instead?) And avoid those trips to the vending machines for junk food. Many people spend about $5 to $8 a day on drinks and snacks, amounting to $1,200 to $$2,000 a year! While you’re saving by buying those bagels and snacks at the grocery store instead, don’t forget to clip coupons and use them to save even more!
3. Save Money by Kicking Bad Habits. If you have a habit that’s hurting you, financing or health-wise, it’s time you kicked the habit. For example a chain smoker could save $300 a month or $3,600 a year! If you’re a drinker, cut down from three drinks on your nights out to just one and save yourself $10 – $20 by the end of the night.
4. Save Money on Utilities. Leaving appliances plugged in when you’re not using them only adds to your electric bill. Unplug toasters, coffee makers and blenders until you need them and only run dishwashers and washing machines when the load is full. If you make a habit of all this, you’ll save 10% on your energy bills.
5. Save Money on Entertainment. Stick to free or low-cost forms of entertainment. For example, choose free museums — or even if it is a paid museum, most offer a free or discount day, attend then. Walk around a lake or have picnics in the park. If you’re a partier, get to the club early before they start charging a cover. For those of you who wouldn’t be able to resist buying more drinks because you’re there longer, then opt for a party at a friend’s house.

Your First Home: The Smart Way to Get It and Keep It

For these and other money-saving tips, see Chapter 3 of my book “Your First Home: The Smart Way to Get It and Keep It.

6 Guidelines to Help You Maximize Your Credit Score

By Lynnette Khalfani-Cox, The Money Coach

Anyone living in today’s society knows that it can be a drag to be turned down for credit. It’s no fun when your application for a car loan, a student loan, a mortgage, or even just a credit card is denied.

Learn how to boost your credit standing by knowing the ins and outs of how your score is determined by Fair Isaac Corp., the company that calculates your FICO credit score.

Here are 6 guidelines to help you maximize your credit score:

1. Pay Your Bills on Time
Since the single-biggest component (35%) of your credit score is based on your payment track record, the best way to boost your credit score is to simply pay your bills on time. Not some of them; all of them. Even if you can only make minimum payments, that’s better than being late with a bill because late payments of 30 days or longer can drop your FICO score by 50 points or more.

2. Don’t Max Out Your Credit Cards
Some people mistakenly think that simply paying their bills on time each month will give them a stellar credit rating, but that’s not true. Your FICO score also considers how much credit you use on a regular basis.

Having a lot of debt signals that you are a potential risk for getting into financial trouble and not paying bills on time. If your credit cards are at or near their limits, you can raise your credit score by knocking down your balances.

In general, try to keep your balances to no more than 25% of your available credit limit. For instance, if you have a card with a $10,000 credit line, make sure you don’t carry a balance of more than $2,500 on that card. If you can pay off your credit cards each month, that’s even better. But if you can’t, it’s better to spread out debt over a few cards, to maintain lower balances, rather than max out any one card.

3. Get financial help with debt
Having lots of credit card debt lowers your credit score. So if you’re struggling to pay off debt or are living paycheck to paycheck, consider getting help from a trustworthy credit counseling agency.

One reputable resource is the National Foundation for Debt Management, a non-profit agency that negotiates with creditors, gets your interest rates lowered, and creates a plan to quickly get you out of debt.

For speedy help, contact NFDM at: http://enroll.nfdm.org/ or call them toll-free at 866-409-6336, and a HUD-approved credit counselor from NFDM will get back to you within 24-48 hours for a free, no-obligation assessment of your situation.

4. Keep Older, Established Accounts Open
It feels good to pay off a credit card and finally get that statement showing a zero balance. However, if you pay off a creditor, don’t make the mistake of closing that account because 15% of your FICO score is based on the length of your credit history. The longer a credit history you have, the better it is for your score.

5. Avoid “Bad” Forms of Credit
You’ve probably walked into a department store and been offered 10% off, or some other discount, just for opening up a credit card with that retailer, right? Did you take the bait? If so, realize that you might have hurt your credit score. Here’s why:

The FICO scoring model rates some forms of credit more favorably than others. For instance, the presence of a mortgage on your credit report will help your score, but too many consumer finance cards (i.e., the cards issued by department stores and retailers) can hurt it. For this reason, do yourself a favor and say “No” to those credit card offers from stores you patronize. Just use a major credit card, such as a Visa, MasterCard, American Express, or Discover Card, if you need to use credit to make your purchases.

6. Only Apply for Credit When You Truly Need It
Just because you get a pre-approved offer in the mail, or some telemarketer calls you to solicit for a credit card, doesn’t mean you should accept it.

You should only seek out credit when you absolutely need it because taking on too much new credit – or even just applying for it – will lower your credit score. Each time you apply for a loan, whether it is a credit card, an auto loan, a mortgage, or a student loan, the lender pulls your credit report and generates an “inquiry” on your credit file. That inquiry remains there for two years. One inquiry can drop your score as much as 35 points.

Also, beware that you may sometimes generate an inquiry without even knowing it! That happened to me, when I recently rented a car with Avis, using my debit card. Rental car companies frequently run your credit report if you use a debit card instead of a credit card. That single inquiry lowered my FICO score by 16 points.

Need a New Car? Foreign Auto Makers Offer Unique Deals; Tell Americans “We Feel Your Pain”

By Lynnette Khalfani-Cox, The Money Coach

I find it quite interesting that more and more foreign auto makers are feeling America’s pain. And they’re trying to capitalize on the angst of the American consumer too.

Recently, Hyundai announced a new deal to ease the minds of Americans worried about layoffs. Under the deal, Hyundai will allow car buyers who get a pink slip within one year of purchasing a Hyundai to return the vehicle.

Hyundai offers return policy if you lose your job

Today, I heard a radio ad from Mitsubishi roasting the $700 billion federal bailout package for the financial industry. The ad said that while Congress is busy “bailing out Wall Street” and writing a check “with 12 zeros behind it,” the Japanese auto company had a bailout plan of its own for struggling consumers. Mitsubishi is offering consumers a “Zero Down” deal and financing from Mitsubishi to drive off the lot with a new car. “All you need,” the ad said, “is your signature.”

Ad Campaigns Touch a Nerve

Both the Hyundai and Mitsubishi offers are pretty savvy marketing strategies.

Hyundai’s campaign touches a nerve considering 11 million Americans are out of a job and hundreds of thousands more layoffs are expected in the next few months. Today alone, several companies announced major job cuts, totaling nearly  50,000 lost positions, including 2,000 announced layoffs at General Motors.

Mitsubishi offers a "zero-down" deal as answer to consumer bailout.

The Mitsubishi initiative clearly plays on the fact that most Americans did not support a bailout of the financial industry, and many also opposed billions of dollars going to American auto makers. Mitsubishi – in launching this somewhat unorthodox ad campaign – is trying of course to sell more cars. But the car maker is also trying to pose its own answer to the question millions of Americans have been asking, which is: “Where is my bailout?” Needless to say, this kind of in-your-face advertising is also taking an indirect jab at competing U.S. car makers Ford, Chrysler, and GM, all of whom went to Congress asking for money with hat in hand.

So should you buy a Hyundai or a Mitsubishi if you’re in the market for a new car? That’s up for you to decide – given your own personal tastes and budget. But one thing is certain:

U.S. auto makers better act fast if they want to catch up to their foreign competitiors, and tap into Americans’ growing unease about their financial situation.