Hey guys, I know this should be in another forum, but I feel like I am getting familair with you guys and want your advice. I am looking at at Suzuki Z400 Quad. They have an offer now where you get 6.95% financing and only have to pay $49 for the first 24 months. After that it jumps up to something crazy like 18% Anyways, is there a way a could make this a good deal? I could probably pay $150/mo for the first 24 months to knock it down.

 

Have you checked local sources for financing? Credit unions typically provide much more competitive rates. I don't know if an ATV purchase would be grouped under a personal unsecured loan, or if you could lump it under a recreational vehicle note. I would start there. I know my local credit union beat the banks by 1.5% when I got my truck. You might also want to read all the fine print. See if there are any 'early payment' clauses. You could always flip the note in a years time, before the rates spike... and go to a local source.

 

That was my thought. Maybe pay $150/mo for the first 24 months and then flip the note to even a 0% credit card and pay the remainder off in a year. That would put me at a 3yr note. Maybe I could just buy the thing on a 0% credit card and keep flipping it to other 0% cards every year.

 

In general, financing what is essentially a 'toy' is never a good idea, falling for a low introductory rate, only to have it spike up after a few months is also bad, and if (I don't know that you are, but I said if) you are making payments on other items such as vehicles, credit cards, other loans, etc, that is a third strike - but you're going to do what you're going to do - so:

First of all, double check all the terms of that financing. I looked into some "0%" financing for a jet ski a couple of years ago, the terms were written so that if you have even one late payment, you automatically jump to something like 18-21% on the remainder of the balance. Don't take the dealers word, actually read the fine print!

Second, I don't understand why you are saying 'flip to a 0% credit card' in two years. If you have one now, that would be the thing to use, if you don't have one, you may not get one after you take on the additional debit of the quad. Planning to roll debit onto a succession of credit cards is not a good idea. Opening a bunch of credit cards will increase your available debit and may hurt your ability to get credit in the future. You may never get the offer you hope for, and/or the card issuer can change the rate at their digression.

Third, plan extra cash for operation expenses (gas and oil aren't cheap), extras (helmet, insurance, mods?), maintenance, breakdowns, etc. A few days of wheeling, coupled with a breakdown and repair could gobble up a couple months payment.

IMHO, a home mortgage is an acceptable debit, vehicle debit is to be kept to a minimum and as short of terms as possible, I find it really hard to justify debit for toys, etc, and credit card debit is like the plague and should be eliminated as soon as possible and avoided at all costs barring extreme financial emergency.

If you have to do it, I would say, find a low interest rate loan, without any wacky terms, no penalty for early payment, and simple interest calculation (nothing 'compounded' or 'balloon' or 'Rule of 72', etc). Take it out at a 'comfortable' monthly payment, then plan to pay extra to get it down ASAP. If you have a month where you need extra cash (quad repairs, vehicle repairs, home repairs, medical, family emergency?) you can fall back to the lower payment.

 

[QUOTE=Corey872]In general, financing what is essentially a 'toy' is never a good idea, falling for a low introductory rate, only to have it spike up after a few months is also bad, and if (I don't know that you are, but I said if) you are making payments on other items such as vehicles, credit cards, other loans, etc, that is a third strike - but you're going to do what you're going to do - so:


Wow.. You want to help me in buying a home? Great information even for folks (like me) who aren't considering buying a toy.

 

Simple Rules About Money
Did you ever wonder why your coffers are empty? Why you are not where you want to be financially? Why you are broke all the time? It is because banks, insurance companies, and mortgage companies do not want you to know these simple truths about your money. In this paper you will learn how money works. My mission is to educate the American people about money, that is why this important financial information is free to you. So please use it.
How Money Works:
Benjamin Franklin discovered the “Rule of 72” and this is how it works. Take 72 and divide it by the interest rate that you are getting and that equals how many years it takes your money to double. Now to show you the power of this let us look at this example. On your 1st birthday your parents received $6,000 and they invested it like this: $2,000 at 3%, $2,000 at 6%, & $2,000 at 12% If left alone here is approximately what you end up with(Does not take into account taxes, fees, and inflation):
3% 6% 12%
72 / 3% = 24 years 72 / 6% = 12 years 72 / 12% = 6 years
Age1 $2,000 $2,000 $2,000
Age 7 … … $4,000
Age13 … $4,000 $8,000
Age19 … … $16,000
Age25 $4,000 $8,000 $32,000
Age31 … … $64,000
Age37 … $16,000 $128,000
Age43 … … $256,000
Age49 $8,000 $32,000 $512,000

Isn’t that something, the $2,000 at 12% is worth more than the other $4,000 invested at 3% and 6%. Now if you are saving your money, it is probably sitting in something that is earning about 3-6%. If so, you have to do one of two things, save it in something that gives you a higher rate of return, or go spend your money because it is worth more today than it will be tomorrow. Here is why, inflation and taxes, if you are saving money at 3% and inflation is at 3% you may think that you are breaking even. Right?
Wrong! Now you have to pay taxes on the few pennies that you did earn. That really stinks, doesn’t it? Here is another point, if you do not get a cost of living raise from your job every year, you are telling your boss that you will work for less this year than you did last year because of inflation. If you feel like you are going backwards, now you know why. You are indeed going backwards especially if you are saving at 3% and taking loans at 12%+(credit card debt).

Debt, How To Eliminate It:
Here is a simple rule, DO NOT GO INTO DEBT! Here is another rule taught to me by wealthy people “If you can not pay for it outright with cash, you can not afford to buy it!” Put that saying on your refrigerator and live by it, it will make a big difference. There are people that want to keep you in debt, (banks, mortgage co.,credit card co.) so they can control you. Remember the golden rule, “He who owns the gold makes the rules.” Remember you don’t own it if you are still paying for it. You may think you own your home but if you still have a mortgage payment, all you are doing is renting your house. Think about it, if you stop paying your mortgage, they kick you out and new people move it. Just like an apartment. It is time to show you a little system that will get most people out of debt, including your mortgage, in about 7 to 10 years. Let’s say that example 1 is your situation.

Example 1
Debt Balance Interest Minimum payment What you have been paying
Discover Card $4,000 12% $150 $200
Visa Card $2,000 10% $80 $100
Master Card $6,000 8% $175 $175
Sears Card $800 15% $25 $50
Penney Card $300 15% $20 $50
Car loan $12,000 8% $327 $327
Car loan $8,000 9% $350 $350
Mortgage $100,000 7% $1,100 $1,100


Now what we need to do is organize and prioritize by the highest interest rate, like in example 2. If the interest rate is the same, then pay the lowest balance debt off first.

Example 2
Debt Balance Interest Minimum payment What you have been paying
Penney Card $300 15% $20 $50
Sears Card $800 15% $25 $50
Discover Card $4,000 12% $150 $200
Visa Card $2,000 10% $80 $100
Car loan $8,000 9% $350 $350
Master Card $6,000 8% $175 $175
Car loan $12,000 8% $327 $327
Mortgage $100,000 7% $1,100 $1,100
According to the “What you have been paying” column in example 2 you are paying $125 extra every month. What you do is pay the minimum on everything except Penny card, which will be paid off in about two months and now you have just freed up another $20 per month for your debt elimination program. The next step is to take the $145 and apply it to the Sears Card minimum payment, so now you are paying $145 extra plus $25 minimum. Pay that to Sears until it is paid off. Now you have $170 extra added to the Discover Card minimum of $150 which will eliminate this debt and so on. By the time you get to your mortgage you will be able to add $1252 to your principal. Example 3 will help you understand this a little better. Also you will see the power of this.
Example 3
Debt Balance Interest Min payment What you will be paying
Penney Card $300 15% $20 $20+$125 until paid off
Sears Card $800 15% $25 $25+$20+$125 until paid off
Discover Card $4,000 12% $150 $150+$25+$20+$125 until paid off
Visa Card $2,000 10% $80 $80+$150+$25+$20+$125 until paid off
Car loan $8,000 9% $350 $350+$80+$150+$25+$20+$125 until paid off
Master Card $6,000 8% $175 $175+$350+$80+$150+$25+$20+$125 until paid off
Car loan $12,000 8% $327 $327+$175+$350+$80+$150+$25+$20+$125 until paid
Mortgage $100,000 7% $1,100 $1,100+$1252 until paid off
The key is to focus on the smallest balance verses highest interest rate first so it will free up cash. It may seem a little crazy at first but this simple plan short circuits the formula for compound interest. If this situation is you and you did this, you would be out of debt in about 6 years, give or take a few months. Remember the more you put towards paying off your debt, the faster you will be debt free and the more you will save in interest. That means you should eliminate unnecessary expenses, live on a budget, clip coupons, save your pennies and focus all your available income on reducing your debt. If you should receive a raise you should channel most of it into reducing debt and building wealth. Practice preventive maintenance on your home and vehicles. An ounce of prevention really is worth a pound of cure. No need to live like a Spartan, but waste not, want not. Use it up, wear it out. You spend less than you earn and invest the difference to create wealth. When your outgo exceeds your inflow, your upkeep becomes your downfall. Continuous methodical disciplined effort can eliminate your debt and compound your wealth.
When paying down debts, be sure to specify that you want your extra payments to go towards the principle, also known as additional to principle. Negotiate interest rates and refinance revolving debt(credit card, dept. store,gas charges) to lower your interest costs. Do not refinance for lower payments if it means a longer payment schedule unless you are making payments larger than the minimum and will save on the lower interest rate by paying off early. Watch out for penalties when paying off debts early. Credit accounts with such penalties should be avoided, read the small print to save big.
Watch out for short introductory no/low interest offers that sky rocket after a few months. Here’s one I just got in the mail, zero APR for 6 months and then it goes to a whopping 19.8% And in small print it says “These rates will not be lower than 19.8% and could be as high as 25.99%”. Add in any fees or late charges and your debt is really compounded. Beware grace periods, in most cases you should pay a credit debt as soon as it arrives to avoid added interest. Do not wait until the due date unless you are certain of how and when the interest is calculated.
If possible set up electronic transfers for all your debts and pay checks. You can set up utilities and other recurring charges to be deducted from your account. You will get a statement of charges and then they will deduct that amount on a set date each month. You want your paycheck deposited and earning interest as quickly as possible, so make sure your bank is transferring your funds in a timely manner.
The two most expensive methods of calculating interest on debt are the two cycle average daily balance method and the average daily balance method including new purchases. The cheapest is the average daily balance method excluding new purchases. The annual percentage rate or APR is the percentage of interest you would pay in a year(12 months or 52 weeks) on a given amount. This complicated calculation can be done in several different ways. Read the small print for information on how and when the percent of interest on any given debt is calculated. A variable rate is based on the loans interest rate plus the Prime Rate as published in the Wall Street Journal which is usually figured monthly. So if the interest is %12 and the Prime Rate 5% then you will be paying %17 on the remaining principal which is calculated each month. The Prime Rate is the variable. Read the small print.

 

As for savings I recommend reducing to what you need to live on for at least eight months, until debt free. Your money is better off paying down debt at 8% to 20% than earning 3% in savings. Indeed when you pay off a 15% credit card you are effectively making 15% on your money. Should a necessary expense arise, you can simply pay the minimums, saving your extra payment until you can pay cash for that expense. Do not go further into debt! Always remember it will set you back on your debt elimination program.

Here is how to close a credit card account for good. Write a letter to them with your name, address, date and then: "please let this letter serve as notice that I am closing my credit card account effective immediately". Give account number and bank name then: "send written notice that my account has been closed and confirm that all credit bureaus were informed that this account was closed by my request". Do not close all your credit lines as this can affect your credit rating. Use one or two off line debit/credit cards for emergencies and cut up all the rest. Under the Fair Credit Billing Act, you are generally liable only up to $50.00 of fraudulent charges on any of your credit cards. In the event of unauthorized use of your credit card, you must notify your credit card provider in accordance with its reporting rules and procedures. Check your credit reports regularly and any time you are turned down for credit.

One further note on this is to continue making payments after you are debt free. You are already use to making the payments, now you can pay yourself instead. I recommend maximizing your 401K, Roth 401K plans and/or IRA. Advantages include tax deferred and a rate of return 8-12% long term average plus employer matching contribution. Disadvantages include 20%+ penalty and taxes for early withdrawal.
Have children? Look into 529 educational savings plans, Education 401K plans and educational IRAs. You should invest in diversified no load mutual funds rate of return historically 6-10% average. Risk is minimized by long term investment, diversification and taking advantage of dollar cost averaging and long term value building. Set it and almost forget it. I recommend a once a year fund direction check up with a fee based professional. One should not invest more than one can lose in ones’ place of employment, after all you are already receiving your living income from them. Your retirement plan will do best over time by being regularly diversified in various investment vehicles.

One should always take advantage of the 401K as soon as possible, even if only the minimum is invested. You make around 50% on your money in most employer matched funds. Do not miss out on this. The total return accumulates tax deferred until withdrawn. A 22 year old investing $18,000 between the ages of 22 and 30 ends up with over $579,000 at retirement(given an average rate of return), while another investor starting 8 years later deposits almost four times as much, $70,000 between the ages of 31 and 65 ends up with only about $470,000 at retirement. The sooner you start, even with a small amount, the more you will accumulate over time. Most 401K plans offer a wide range of national and international stock funds, bond funds, and money market funds to invest in as well as investment advice and consoling. Take advantage of these helpful services and be sure to read all paperwork and prospectuses that are provided. Do not borrow from your 401K unless it is an emergency. You lose on opportunity cost, taxes and fees. Taxes are not deferred on the interest you pay yourself, so you are double taxed when you take the money out at retirement. Dollar cost averaging won’t work if you take the dollars out before retirement.

Dollar cost averaging works like this. Investing $100 a week in a fund, if the cost per share of the fund

goes up, you buy less of the fund. But it is worth more. Thus $10 a share equals 10 shares. If the cost per share of the fund goes down, you buy more shares. But they are worth less until the price goes back up. Thus $1 a share equals 100 shares. Over time this averages out. So it is not as important what the value is today, only when you need to withdraw your money at retirement by selling your shares does it become important what the value is. Always take inflation, taxes and fees into account when planning for retirement. You should build these costs into your retirement savings plan. Achieving success is easy when you have a goal and a plan to get there. Again take advantage of all the resources available from your 401k provider.

Mortgages:

The average homeowner refinances or moves every 5 to 7 years. I will explain why I told you that latter, right now I am going to show you the payment schedule for the first year of a typical $165,000 loan at 7.75% for 30 years.



Months Payments Amount of payment Amount of payment Principle balance, amount left

that goes toward principle: that goes toward interest: to pay on loan:

$165,000.00

1 $1,182.08 $116.46 $1,065.62 $164,883.54

2 $1,182.08 $117.21 $1,064.87 $164,766.34

3 $1,182.08 $117.96 $1,064.12 $164,648.37

4 $1,182.08 $118.73 $1,063.35 $164,529.65

5 $1,182.08 $119.49 $1,062.59 $164,410.15

6 $1,182.08 $120.26 $1,061.82 $164,289.29

7 $1,182.08 $121.04 $1,061.04 $164,168.85

8 $1,182.08 $121.82 $1,060.26 $164,047.32

9 $1,182.08 $122.61 $1,059.47 $163,924.42

10 $1,182.08 $123.40 $1,058.68 $163,801.01

11 $1,182.08 $124.20 $1,057.88 $163,676.81

12 $1,182.08 $125.00 $1,057.08 $163,551.81



Totals $14,184.96 $1,448.18 $12,736.78 $163,551.81

So after one year you have paid $14,184.96 of which only $1,448.18 has gone to reducing the balance. So you have just spent a year and $12,736.78 in interest to make $1,448.18 in equity. Okay now let’s say you decide to refinance your home. Well if you refinance your home for just the remaining balance, that means you just spent $12,184.96 in interest on a $1,448.18 loan. That is a 979.5% rate not a 7.75% rate. Remember earlier that I would explain why I told you the average person moves or refinances every 5 to 7 years, well now let me show you the totals for those years on the same loan as above.

Months Payments Principle Interest Balance

60(5yrs.) $70,924.80 $8,501.23 $62,423.57 $156,498.77

84(7yrs.) $99,294.72 $12,934.27 $86,360.45 $152,065.77

So after seven years you have paid $99,294.72 of which only $12,934.27 has gone to reducing the balance. So you have just spent seven years and $86,360.45 in interest to make $12,934.27 in equity. The only way you can get the 7.75% is if you keep the loan for the entire 30 years or pay it off early and have no mortgage payment. If you refinance you just paid a lot of interest for a little money because remember when you refinance you still have a mortgage payment. Now you know why you have people calling you trying to refinance you. Think twice before you refinance.

Your best bet is to pay your mortgage off early by paying additional to principal and live rent free thereafter. Run the math and you will find a bigger savings in paying off your mortgage verses any tax savings, even if there is a fee for prepaying the principal. Need a bigger home? Sell your ‘paid off’ home for cash, take some more from savings and pay cash for your bigger new home, avoiding all that interest. Here’s another quick example. If you buy a $250,000 home, with a $200,000 mortgage, you will end up paying about $600,000 over 30 years. About $400,000 of that is interest. Here is another angle to look at: if you had invested that $400,000 you would have earned a substantial amount over that same time frame. And do not forget that you had to work day after day for that money just to hand it over to some banker.

Home buyers beware the standard front-end loaded installment note. What you want is a installment note calculated by simple interest or a simple interest single payment note with monthly payments and a way to pay additional to principal. Cancel your private mortgage insurance when you have 20% or more equity in your home. Also pass on the banks credit life and disability insurance on any loan. Ask your insurance agent for a better rate, remember a higher deductible means a lower premium and multiple services from the same agent can also lower your premiums.

Paying your mortgage off early can save you thousands in interest, which makes giving up the small tax break worthwhile. Also if you are in a higher tax bracket(28%+), you won’t get much of a break these days. Assumable mortgages can be a great selling point when you do sell your home, however the interest rate can change without warning, making your assumable loan less attractive. Why take over your loan when the buyer can finance at a cheaper interest rate? This is a risky proposition, no one can predict when interest rates will be at their lowest and it may be many years before you sell your home.

Definitely shop around for the lowest rate and shortest pay schedule you can afford. You should note that putting all your money into paying off your mortgage ties up your liquid cash for an extended time frame. If liquidity is important to you, you should divide your money accordingly into paying down your debt and investing in more easily accessed liquid investments.

There is no doubt that a home is one of the best investments you can make, assuming you are able to make the payments. You get to have a place to live and you build equity in your property. However it can become a real money pit if you refinance and take second mortgages out on it. Remember the value of a dollar today is not the same as the value of a dollar tomorrow. Paying down your mortgage will really add to your equity and will reduce the balance that interest is calculated on, putting more money in your pocket not the banks over the long run.

 

Life Insurance Explained:
Ever wonder why your life insurance policy is so confusing? I think it is done on purpose so you can not figure out how it works. You need to have only enough insurance to pay expenses and take care of your loved ones after you are gone. If you are young and have no dependents you may not need any more insurance than what your employer provides. As your situation changes you will want to add sufficient insurance to keep up. The secret about it is to buy cheap, guaranteed, convertible, level premium term life insurance. For some with higher incomes, endowment policies or ‘paid-up’ life insurance may be better options. If protection and distribution of assets is important look into Trusts. The insurance with a “savings account”, that is whole life, universal life, variable life, variable universal life, run for your life etc... just is not good. Brokers make big commissions off these types of policies. If you bought your policy strictly for protection it is too expensive and if you bought it as a investment, well, most of the time your mattress is a better investment.
The savings account of a whole life policy normally works like this, let’s say you go to your bank and you deposit $1,000 in your savings account. When you get your passbook back the balance says $0, how many more times are you going to deposit into that account?(I thought paying a fee to see a teller was bad) That happens in most policies for the first 2-5 years(got to pay the brokers commissions). Now you go back to the bank and try to withdraw some money from your savings account(if they actually left any in it), so you ask the teller for a withdrawal slip and he hands you a loan application. That’s how withdrawals work, you have to borrow your own money at an interest rate of anywhere from 6-8%. Why would you want to borrow your own money? I’ve seen agents sell this as a benefit by saying it is a “tax-free” loan, last time I checked all loans are tax-free(a loan is not income). When it comes to the savings account rate of return, they can tell you that it is earning a lot of money all they want but if they take all the money from it the first 2-5 years, what’s $0 invested at 10% going to be? 0% right? Wrong, it will be a negative 100%. Remember you invested $1,000 in this savings account, it would be 0% if you still had your $1,000 but you don’t.
Wait, it gets even better. Let’s say somehow you did get some type of a balance in this account, when you die your family doesn’t get the money, the insurance company keeps it. After learning that, is your mattress a better savings account or is life insurance? Beware of agents that say your policy will be “paid up”. After your “savings account” runs out of money you will get a bill saying pay this much or your policy will lapse and they will cancel you. Good luck trying to find inexpensive life insurance when you are in your 50’s and 60’s. Those are not part of the policy, look in the definitions part and you can see that for yourself. Remember this, when you die, what the policy says goes. Those pieces of paper that you get are not part of the policy, look that up in the definitions-index chapter of the policy.
All this information that I gave you is verifiable, just go to your local library and pick up a book on finances. I encourage you to do that. A lot of these companies operate on our ignorance, don’t be a victim. They are stealing your wealth. They make money off you, so it is always in their self interest to promote their services in the best light possible. Beware their self interest where your money is concerned. Insurance companies make money, or they would not be in business. In fact they have already calculated that they will make money on anything they sell you. You have to have the protection of insurance. You are betting something bad will happen, the insurance company is betting it won’t and they are usually right.
Do not cancel any insurance until you are covered by the new policy. Here are some examples of policies agents love to sell because you will rarely use them: extended warranties on appliances, credit disability insurance, rental car and road side services like emergency towing and multiple medical liability insurance. Electronics rarely break down out of warranty these days. Credit disability insurance through a bank or lender is far too costly and in the case of a home if you default on the payments they get the home back. Road side services sound good when you are sitting in the agents office, but you will probably forget you have them later on. If you already have medical liability through your health insurance you may not need to have redundant health coverage on your car insurance or under insured motorist coverage(unless mandated by your states law). Look into a single umbrella liability policy that will provide sufficient coverage in all circumstances. Take the savings from these changes and either pay down your debt or if you are out of debt, invest it. Make your money work for you, not against you.
Did you know that only about 2% to 4% of Americans will retire financially independent? That is only 2 to 4 out of every 100 people. That is a depressing statistic, isn’t it. This is the worlds wealthiest nation and the people are broke. They are stealing your wealth and keeping this knowledge from you. Don’t be a victim of ignorance.
Coming soon: Trading Stocks, Bonds, Futures and other ways to make your money work for you, but only if you are willing to work for your money.


Sorry bout the long posts, hope you all find something usefull here.

 

I agree with canstacker, don't finance a toy. If you can avoid it, don't finance a car either.

 

if you pay $150.00 a month for 24 months at 6.95% that will pay off $3350.00. how much is the bike and how much are you going to put down?

 

“If you can not pay for it outright with cash, you can not afford to buy it!” Pure gold, best advice I can give to you. Heh, "A penny saved is a penny earned" so true.

 

OUTSTANDING INFORMATION!! Thank you for the long posts. They are worth reading to me.