Chicago Bankruptcy Lawyer Blog

Owning a home involves a lot of risk for potential expenses. You’ll definitely have to perform costly repairs on your home if you own it long enough, and you may decide someday that you want to renovate your home. When considering homeownership expenses, people sometimes overlook one very important detail: the contents of their homes. How does home ownership affect the contents of your home, and what can you do about it? Keep these things in mind when you’re shopping for homeowner’s insurance:

How do disasters affect my stuff?

No-one plans for the unexpected things that happen in life, but you’ve got to consider the possibilities to make sure you’re protected in the event that the unlikely happens. Possessions may need to be replaced in a number of potential scenarios. Do you ever leave personal property in your car? Homeowners insurance covers the cost of replacing stolen property – even if it’s not inside your home. Ever had a hot water heater explode and leak all over everything stored in your basement, ruining it all? Most standard homeowner’s policies cover accidental discharge of water from a plumbing system, and will give you money against the ruined items. The tricky part comes when you’re looking at what’s actually covered under a homeowner’s policy, and how the insurance company values your possessions.

“Acts of God.”

While most homeowners’ policies don’t specifically mention “acts of God,” you may run into a roadblock if your home damage can be construed as an “act of God” by the insurance company. Most homeowner’s insurance policies only cover some natural disasters. Damage from wind, lightning or hail may be covered under a standard homeowner’s policy, while damage from flooding and earthquakes typically aren’t covered under a standard policy. If you live in an area prone to flooding, your lender will probably require you to purchase flood insurance. If your basement floods due to a fluke rainstorm and all your possessions are damaged, you might be out of luck.

Generally speaking, the standard policy covers most man-made situations (i.e. electrical fire) but not large-scale natural disasters. Check the language in your policy very carefully, and talk with your insurer to see what’s covered and whether you need to purchase additional coverage.

Replacement cost vs. cash value.

When you’re looking at replacing your belongings, find out whether your policy covers replacement cost or actual cash value. Contrary to how it sounds, replacement cost is preferable to actual cash value. When insurance companies figure the cash value of your belongings, they take depreciation into consideration. If your belongings are old, you may get only a fraction of what you need to replace them, regardless of what you spent to purchase them. When you have a replacement cost policy, the insurance company gives you the amount that it would actually cost to replace your belongings at present-day prices, so you won’t be caught short with only a fraction of the cash you need to replace your belongings. However, replacement cost policies are generally more expensive than cash value policies, so do the math when you're shopping for homeowner's insurance to see what makes sense in your situation.

-Money Maven

You may have heard that phrase before and wondered exactly what it means. Well, it’s got nothing to do with a past due rental on a Casper costume. It’s a pain in the neck, that’s what it is. It’s another annoying piece of paper, or harassing phone call, or distressing item on your credit report. It’s for a past due bill which is not yours. You were just lucky enough to have the same name, or a social security number that is close to the real deadbeat’s, or some other quirky coincidence.

Here’s how it goes, you get a letter in the mail and the outside of the envelope is stamped “Final Collection Notice!” and it’s addressed to you. It’s a bill for something you know nothing about. Now, your first thought is, “No, this can’t be mine.” Then, it’s, “Is it?” And you spend the next half hour wracking your brain trying to recall if it could be you, or your spouse or maybe even one of your kids who might have initiated the charge.

This is usually followed up by denial and righteous indignation. You pick up the phone call, dial the number and right away start off with the claim that “it’s not my bill.” As you relate the details, you can just imagine the person on the other end of the line, rolling her eyes and nodding her head and thinking, “Yeah, yeah… I’ve heard that one before.” Naturally, you are not believed.

You will continue to be called at all hours of the day or night, peppered with letters, inundated with email, and generally annoyed and harassed, until such time as you either pay the debt (not yours, remember!) or prove that it doesn’t belong to you. Believe it or not, a lot of people who aren’t responsible for it pay the bill, just to stop the harassment!

Can you just ignore the bills and phone calls, since they’re not yours anyway? It’s best not to, because you can’t be sure that this bill won’t show up on your credit report – usually just when you’re just about to do something financially dramatic, like refinance your mortgage. That’s why it’s a good idea to check your credit reports on an annual basis, each year, every year. In case you’re not aware, there are three major credit reporting companies, Experian, TransUnion and Equifax. But save yourself a couple of steps and order your free credit report at www.annualcreditreport.com where you can also view them online.

If you’re very lucky, the phantom debt is not showing up on your credit reports, and you’re only getting harassing phone calls and threatening letters. No biggie. You can stop them. What you need to do is send a politely worded letter to the collection agency or the company that’s bothering you, and tell them the debt is not yours and that you’re under no obligation to pay it. Period. Send the letter by certified mail, with return receipt, so you know exactly who signs for it. Then, when and if they call again, you have some recourse. The Federal Trade Commission, as well as your state’s office of the attorney general, likes that kind of stuff almost as little as you. If you’ve got to do it, pull in the big guns. But stand firm.

--Debt Diva

Credit card companies have a fraud department that watches your account like a hawk for high-risk activities. They can be your best friend if your credit card account has been compromised. But they can also be your worst enemy if they mistakenly suspect fraud.

Let me give you an example. Like so many other people who struggle with day to day budgeting, I have a friend, let's call her Carol Consumer, who maintains what she calls her “emergency” credit card. Whenever she uses it, she immediately pays it down to zero, so that the available credit is always there for an emergency. Her logic, and it makes sense, is it’s important to have some money available somewhere, for “just in case” stuff – emergency doctor bills, emergency car repairs, emergency groceries – you’ve probably got your own set of emergency factors. A lot of people have some sort of emergency credit on stand-by.

Well, Carol lost her father recently. That’s a tough situation for anyone, but more so when, as is common in this day and age, family is separated by many miles and not a few states. We all consider that, in an emergency, we can get anywhere we need to get within a day, thanks to air travel.

But within a single 24-hour period, Carol was overwhelmed not just with grief but also with stress, which might have been avoided. In the wake of the phone call alerting her to the sad news, she quickly booked a round trip flight for herself and her family, arranged for a hotel room for the duration of the funeral, and reserved a car that they would pick up at the airport.

Then she went shopping, while still in her own town, to purchase the incidentals needed for the trip and to provide the supplies she had to stock up on for her house/dog sitter. Loaded up with a shopping cart full of goods, she proceeded to the register and pulled out the emergency credit card. Denied. She tried again; after all, she had just used it for the airline tickets and car and hotel reservations. Again, denied. Mortified, Carol paid the cashier with cash, that she really could ill afford.

When she got back home she immediately called the credit card company – one of the “big” ones, starts with a W, in case you’re wondering. Upon speaking with a representative, she learned that, because she had a zero balance for a while (about two months, according to my friend), and all of a sudden there was a flurry of activity on it, they suspected fraud or theft. So, for “her protection,” they said, they blocked her account – no other charges would be authorized until she confirmed that she, the cardholder, had made those charges. The credit card company would, within a week’s time, send an affidavit that she needs to sign and return. And, after they get the affidavit back, her credit card privileges would be restored.

Naturally, Carol was upset, who wouldn’t be? She explained the emergency circumstances, but the representative was either just plain inept or else, just plain insensitive. Carol’s voice ratcheted up a pitch or two, and by the end of the phone call she was in tears. The representative hung up on her.

Once calmed, Carol called back, and took the case up the ladder to a supervisor; she was told that, now, the card was canceled, not just blocked. The situation has escalated from bad to worse.

In an effort to stem the increasing occurrence of fraudulent activities, the credit card companies are becoming too protective, occasionally to the detriment of the consumer. If you are indeed the victim of fraud, you can appreciate their vigilance. But it is absolutely mind boggling that the legitimate cardholder becomes the victim of their own emergency preparedness.

Now, Carol is without a credit card for a trip that she must make. When she gets back, she must deal with the hassle of affidavits and issuance of new cards or even shopping around for a new credit card company that is a little more compassionate.

What could have been done differently? Surely, the credit card company has my friend’s phone number on file. A simple phone call to her, verifying the charges as hers, could have eliminated any doubt. On the flip side, had she been thinking straight, perhaps a phone call to the credit card company by my friend prior to making the charges would have been prudent. But who would have thought that the “next of kin” list would have to include the credit card company?

--Debt Diva

Become a Secret Shopper!
Make Money With Online Surveys!

I bet you’ve received hundreds of these types of scammy, spammy letters in your e-mail box. The majority of them want you to send them money upfront, even before they tell you how to go about becoming richer. Hopefully, you’ve pushed the SPAM button and deleted them all. In most cases* you should never have to pay money upfront to make money.

But if you’ve been intrigued with the possibility of making money from home, maybe because money is tight now and you're looking for a way to supplement your regular income and keep your budget balanced. You should know, it is possible to make extra money from home, but not from these phony solicitations.

From personal experience, I know that there are opportunities to make money from right there, in front of your computer screen. Online surveys and secret shopper websites may be legitimate, but you have to make the initial contact – they’re not actively looking for you. Some legitimate operations include www.keynote.com, www.2020research.com, www.mysurvey.com and www.testspin.com.

Now, you need to bear this in mind: You are not going to get rich doing surveys. Some surveys pay as little as $2 a survey, others can go as high as $100 or even $150 per survey, but the higher paying ones are going to have very rigid demographic criteria, for example you need to be a CEO of a Fortune 500 company who can speak Urdu. Payments for completed surveys, evaluations or even participation in a test panel or forum, can be remitted in the form of a check, online payment, gift certificates or “points.”

Now, despite spam claims to the contrary, you can’t earn a decent living from completing online surveys. At best, you’ll have a little extra mad money. If you really want to earn money while staying at home, you have to have some sort of skill, not just an opinion. For example, I stay home and write interesting, informative and insightful blurbs (debatable, I know) for people like you. But blogging is only one option. Are you a web designer or programmer, can you type fast and accurately, do you have good organizational skills, have you got a background in bookkeeping or accounting? If you’ve got a degree in English, you might want to consider article or content writing or document editing. If you’ve got a background in math, you could consider becoming an online tutor.

Several websites such as www.guru.com, www.elance.com, www.scriptlance.com and www.findacoder.com bring buyers and providers together by listing cyber job opportunities that you can apply for. *Some of these sites require you to become a paid member – they are all legitimate, but there’s no guarantee that by becoming a paid member you will get an assignment. If available, take advantage of the sites that offer free limited-bidding memberships (www.elance.com does this); complete your profile, take the skills test (if offered) and start bidding. If your price is right, and you’ve got the qualifications, and you can sell yourself through your online profile, you’re on your way to your first cyber assignment.

With skills and expertise, time on your hands, a good computer and a fast internet connection, you can work from home and make money, at the hours you set. But understand that cyber jobs are “real” jobs. You’ve still got to be committed to providing a quality service; the only difference between a 9-to-5 desk job and a cyber job, is that you get to stay in your pajamas while you’re working.

--Debt Diva

They’re everywhere. Subtle and not-so-subtle messages telling you that your life would be better “if only” you had a new television, or drank a specific brand of alcohol, or sent your kids to a certain school. Marketing messages don’t have to beat you over the head, either; some marketers are subtle, with messages designed to identify your worries and offer you the best solution – available only through their corporation.

Be objective.

Don’t take any marketing message at face value. Ask yourself what the marketer intended with the advertisement or testimonial. Is it obvious that a product is being sold? Is someone trying to get you to call for more information? Before you act on any marketing message, consider the purpose of the message and ask yourself if you really need what the advertiser is offering. Think about whether the product or service will truly deliver what the advertiser promises.

For example, if you see a group of shiny, happy people drinking Diet Coke, resist the temptation to buy it. Your life isn’t going to suddenly fill up with shiny, happy people just because they like Diet Coke on TV, so save yourself some cash and drink water.

Want vs. need.

In this time of economic uncertainty, it’s more important than ever to look objectively at “want” vs. “need.” If a corporation is capitalizing on your “wants” and not providing for your “needs,” ignore their messages. iPhone advertising is a great example of a marketing message designed to target wants. It’s a stretch whether a cell phone should be considered a “need” at all, but even if you do feel that you need a cell phone, you don’t need the iPhone. A cell phone enables you to talk to people on the go. An iPhone enables you to check the Internet, check emails, play games, take and send pictures, listen to music – all fun and interesting things, but nothing resembling a need.

Be careful with your financial future.

When it comes to financial products, it’s vital to be careful about where you put your money. This is one of the biggest problems that consumers have, because we rely on financial professionals to steer us in the right direction when it comes to financial products. However, you must always keep in mind that even financial institutions – perhaps especially financial institutions – are in it to make money. Just because a financial professional tells you that their deal is the best, doesn’t mean it actually is the best.

When shopping for financial products – credit cards, savings accounts, CDs, IRAs, mutual funds, stocks – shop around. Don’t rely on your bank or credit union to steer you in the right direction. Make sure you get at least 3-5 quotes from different institutions, and check both online and at brick-and-mortar banks. You can often get a better deal online, but then you have limited access to a banking professional, so you have to decide which is more important to you in the long run.

Take back your financial future.

Bottom line: don’t mindlessly follow corporate advertising and recommendations. Learn to think for yourself, evaluate marketing messages and do some research before you do anything with your money.

One of the best known and most beloved marketing icons of all time is the Gerber baby. Despite the fact that she’s probably a grandmother herself by now, that sweet little baby still sells and sells. Baby food, formula, juice, diapers, bottles, clothes… all the essential items that you need to give your baby a good head start in life. Yup, that’s a prolifically profitable baby; she has made a lot of money for Gerber over the decades. You might be thinking, “Aha! You missed one! What about Gerber Life Insurance for children? Isn’t she on the advertisement for Gerber Life Insurance?” Yes, she is. But note, I said “essential” items for a child. Life insurance for a child, regardless of the issuer, is not an essential, though the marketing companies will certainly lead you to believe it.

You’d have to have been living on another planet to not have seen the advertisements for Gerber Life – just turn on the television and watch any program aimed at better parenting. I dare you to open up a parenting magazine, and not have a tiny little card come fluttering out of it, touting the importance of life insurance for your child. They tug at your heart strings with the rhetoric: Your child is special, unique, one-of-a-kind, blah blah blah. It continues: If you love your child you must be willing to acknowledge her worth. You must buy her her own life insurance policy.

The advertisers are doing what they do best – manipulating you. Of course you love your child. You’d lay down your own life in her stead, if that was necessary. But you don’t need to buy a life insurance policy for her.

What you need to do for your child is provide for her future, by ensuring that if something happens to you or your spouse, at least all of her financial needs will be taken care of through the proceeds of your own life insurance policy. Most individuals have far less life insurance than they should. The amount you save from not buying a child’s policy can be used to increase your own life insurance benefit, or that of your spouse.

The premise behind life insurance is to guarantee that the earning stream of the family’s primary breadwinner will continue for the benefit of the survivors or beneficiaries; usually, the primary breadwinner is the mother or father. Unless your child is the next silver screen darling like Dakota Fanning, or basketball superstars like then-teenagers LeBron James and Kobe Bryant, or a child protégé of Mozart’s ilk, then you don’t need to buy a separate life insurance policy for them.

Granted, the premium for a children’s life insurance policy is relatively small (only $1 for the first month!!), and it’s guaranteed over the life of your child, and she can convert it to an adult policy when she reaches maturity, and that policy will be far cheaper than buying an adult policy. But, all that still doesn’t mean that it’s essential.

Money is hard enough to come by now. Use it wisely, and make the decision where to put your money using your head, and not your heart.

--Debt Diva

Let’s talk a bit about the sub-prime crisis, shall we? I know -- what a depressing topic. But for a great many homeowners, the sub-prime crisis has had some effect on them, one way or another. If it’s only touched you peripherally (say with a reduced property value), then you’re very lucky. But if you’re not so lucky, well, all is not lost -- “all” being your home.

This past Monday, according to a press release, Fannie Mae sent a signal to U.S. banks and lenders that the “solution” to their housing loan problems was not in property foreclosures, but in short sales or modifications of the interest rates on the loans or the terms of the loan. In case you’re wondering, Freddie Mac had already made the same commitment late last month.

Given that “good news,” plenty of homeowners with a mortgage loan guaranteed under the Fannie Mae or Freddie Mac loan programs probably believe that they can at least breathe a little bit easier, because of the augmented incentives that the mortgage servicing companies have been offered.

The reality is far different from the belief, though. It’s far easier and quicker for the banks to continue to foreclose on your property, even while you’re trying to negotiate in “good faith” with them. Before you know it, your house is no longer your house, and you’re out on the street. Nice try on your part, though.

So, what about that “short sale” option that they mentioned in the press release? You may have heard the expression “short sale” but weren’t entirely sure what it was. Well, in a short sale, a potential buyer of your property can make an offer on your house for less than the loan amount outstanding, and the bank (hopefully) agrees that it will take the lesser amount and releases you from your indebtedness. Done deal. Except that you no longer own the house. Not so good.

If you want to keep your house, and I’d expect that you do, you need to be a little proactive and you had better move quickly. Provided that you’ve got a regular and steady income stream, your only real option is to consider Chapter 13 bankruptcy. In a Chapter 13, the foreclosure proceeding initiated by your lender is stayed or halted, as are most collection proceedings against your property. In a way, the Chapter 13 is a modified loan agreement, but of your own design. What you are doing, in essence, is proposing a repayment plan over the next three to five years that works for you, given your financial situation. If the Chapter 13 petition is approved by the courts, the lender isn’t allowed to hound you for repayment under the original agreement; they must accept your court-approved terms.

Once the Chapter 13 is approved, and your loan is restructured, it is up to you to keep your payments current or else you can still lose your property. It is up to you. Think fast.

Good luck.

-- Debt Diva for DebtStoppers

With rising gas prices, consumers are running in droves to give up their SUVs and extended-cab trucks in favor of small, hybrid cars. Sticker shock is enough to drive consumers back to the dealer, but is it really worthwhile to give up your vehicle in order to save money on gas? Consider these important costs:

You may have to pay a prepayment penalty when you turn in your large vehicle.

Many lenders charge a prepayment penalty for paying a loan early. Depending on your lender, this prepayment penalty can range anywhere from a few hundred dollars to a few thousand. You must figure that prepayment penalty into the cost of trading in your car and owning a new vehicle, so add a few thousand dollars to your new car’s pricetag. If you have a $3,000 prepayment penalty, figure in an extra $50 per month for the next five years over the life of your new car loan.

Hybrid vehicles cost more.

Depending on the car you’re looking at, hybrid vehicles cost anymore from $1,000-$8,000 more than their standard counterparts. The cost of manufacturing hybrids is still higher than standard vehicles, and manufacturers pass that cost on to the consumer. But don’t think of it in simple terms of “I’ll spend $1,000 extra on gas in the next two years, anyway,” – you’ve got to figure in the fact that you’re paying interest on that thousand dollars for the next five years of your new car loan. If you get a car at the high end of that range – one that’s $8,000 more than the standard version – you’re paying an extra $150 per month just on the increased price.

Car insurance isn’t a static number.

Car insurance varies depending on a lot of factors, but a general rule of thumb is that newer vehicles cost more to insure than older vehicles. If you’re trading in your 4-year-old vehicle for a brand new car, you can count on paying more for car insurance. A middle-aged female in a low-cost state can count on at least $50 per month price increase. A male under 24 in a high-cost state may pay as much as $150-200 more per month, depending on the vehicle. That adds up.

How much do you spend in gas?

Smaller vehicles still use gas, so making the switch from a large vehicle to a small vehicle may not yield the gas savings that you expect. Depending on the size of your gas tank and your new car’s mileage, you may save anywhere from $20-$40 per fill up. If you use a tank of gas per week at the high end of that range, your savings might be worthwhile if you don’t spend a lot on prepayment penalties, a more expensive vehicle and car insurance. If you fill up twice a month and you’re only saving $20 per tank, your cost savings on gas will not pay for your expenses over the life of your new vehicle loan.

Think twice before you give up your large vehicle, and do the math.

-Money Maven

If you haven’t already started (or finished) your back-to-school supplies shopping because you’re a bit strapped for cash, welcome to the club! Higher oil prices have resulted in higher prices in just about everything else, not just at the pump and the grocery store.. You’re on a limited budget, but you know that you have to buy this stuff, and your kids keep reminding you on a regular basis. So what’s a parent to do? Go shopping smart.

Remember one thing; the retailers are in the same (sinking) ship as you… they need the September through December retail sales to put their numbers in the black. Simply put, they need YOU. You control your own pocketbook and you have to pick and choose wisely. So here are a few ideas to make the most of those shopping sprees.

Shop the back-to-school sales. Sounds simple, but don’t buy it unless it’s on sale. Look for BOGO (buy one get one) deals -- free is best, but half price is good, too. Several of the office supply stores are offering one cent deals; great for getting rid of those pesky pennies in your pocket. Stock up on supplies that offer the highest savings; when the kids come back to you in October because their notebook is filled, you can draw on your stash and not have to go out and pay full price.

Forego the celebrity endorsement -- you need your money more than they do. The branding phenomenon is what really costs. Yes, your little girl wants the Hannah Montana notebook and pencil box, and your tween wants the Nick Jonas loose-leaf folder, and Heaven knows what your teenager wants on his stuff, but you know it can’t be good. Dumb it down, make it plain and simple, without the high profile celebrity picture.

And speaking of plain brown wrappers… do you really need those fancy book covers that snap on in a second and cost about $3 to $5 each? Remember the days we used brown paper bags that we got for free from the grocery store? Here’s a thought; go to a moving supply store and buy a giant roll of brown packing paper for about $30. The one we bought 5 years ago is still going strong, and we cover books and notebooks (we’re talking more than a dozen books per kid) for three kids each year.

And still speaking of plain brown wrappers… can they brown bag it? School lunches are notorious – never sure what exactly they’re supposed to be and you can never be sure your kids are eating them anyway. Make lunch at home, and send your youngster off to school with something you know they’ll consume. Oh, and forget about those pre-packaged deals with juice, crackers, some odd bit of sausage or cold pizza on a mini bagel and a bag of Skittles. They’re high in fat, salt, sugar, additives and yuchiness and they’re expensive to boot.

Last but not least -- two words: Dollar Store.

-- Debt Diva for DebtStoppers

You may think that you’ve done all the budgeting and saving and cutting and minimizing that you possibly could ever do, and there’s nothing left to squeeze. Start squishing, cause here are a few more ideas…

1. Cancel that daily newspaper subscription, most newspapers now are online anyway and you can get all the information you need there; if you’re a coupon clipper (and you should be) you can get Sunday-only delivery (and then you won’t have to miss the funny pages, either).

2. Don’t dump your coins in the for-fee coin counter at the supermarket, they charge about 9 cents on the dollar (though they call it 8.9%, and what is with that? It always rounds up in their favor!). Choose instead, the option (if available) to print for free, e-certificates and e-cards to several online retailers, including Amazon and Old Navy; combine those with free-shipping deals that you can find online with a little bit of searching.

3. Save money on stamps and shipping; you can buy stamps at their regular prices with free shipping through the U.S. post office website; they’re usually delivered a day or two after ordering. If you’re shipping packages, print your postage online and save a portion of the shipping fee and then drop the package off at the post office, or with the mail carrier.

4. Consider switching your regular light bulbs to compact fluorescent bulbs. Yes, they’re a bit more expensive at the onset, but within about 3 months, the energy savings has paid for them, and they last on average 10 times longer than the old-fashioned incandescent bulbs.

5. Unplug, not just turn off, all of the appliances that you’re not using. Even plugged in, they still draw a tiny bit of electricity, and that all adds up.

6. Rethink your cable television package; you don’t need the super-duper deluxe 7,000 channel package deal if the 20 channel deal works because you only watch 20 channels anyway.

7. Consider VOIP to save money on your local and long distance telephone calls. Look, you’re using the computer anyway, buy yourself a headphone-mike combo set, and sign up on Skye or some other VOIP carrier and talk to your hearts content.

8. Make the dry cleaner persona non grata. Despite what the label says, not every garment must be dry cleaned. If you use a clothes dryer, you can buy those dry cleaning kits to “freshen” your clothes up; you can do more than one garment for the price of a pair of pants. Hand-wash those garments that can be (check the fiber content, then check online for confirmation), and dry it flat. And speaking of clothes dryers, do you really need yours? Remember the old-fashioned lines in the back yard? Is it doable for you? Make solar power work for you.

9. Get out or create a sewing box and sew or patch those seams, pockets and holes before they get out of control and have to be brought to a tailor (or worse, thrown away). Missing a button? Check the seams of your other shirts for extras, and don’t ever throw a shirt away without cutting all of the buttons off to keep for spares. Haven’t done anything like this since Home Ec in high school? Don’t worry, it’s like riding a bicycle; it will all come back to you.

10. Make friends with the guys and gals in the orange aprons… you know the ones I’m talking about, right? The ones in the massive home improvement store in every neighborhood. If you need something, learn how to make it yourself. If you need something fixed, learn how to fix it. Consider signing up for their free how-to classes for all kinds of tasks, which you might think are beyond your ability.


-- Debt Diva for DebtStoppers

On the subject of buying new cars; many consumers don’t give enough thought to the trade-in value of their existing automobiles. The salesman says “I’ll give you $5,000 for your car,” and most people take the offer without knowing whether they’re getting a reasonable deal or whether they’re losing valuable money. How can you decide whether you’re getting enough for your trade-in? Consider these valuable tips:

Spend a little; make a lot.

The condition of your trade-in vehicle has a lot to do with the trade-in value that a dealer is willing to offer. If your car is muddy, messy and poorly-maintained, the dealer has to do more to make your car salable, and will pay you less for your car. Get your car detailed before you take it to the lot; a simple step that costs you $50-75 can get you hundreds more on your trade-in. Make sure your oil change is up-to-date and that your car appears to be well maintained; the dealer will assume he has to do less to make the car ready to resale, and will offer you more money. One of the key criteria to determining trade-in value is condition, so don’t neglect this aspect of your vehicle when you’re car shopping.

Figure out what your vehicle is worth.

Don’t trade-in your car without knowing what it is worth. Check the Kelly Blue Book value on your car – something you can do online with just a few minutes of research – and be realistic with your expectations. Don’t expect to get full value for your car if the upholstery is ripped, the dashboard is scuffed up and the paintjob is missing a few chips. But don’t let a dealer take advantage of you, either.

Once you determine the Kelly Blue Book value of your car, do a little shopping to see what people are charging for similar models. Are other dealers asking considerably less than Blue Book value for your car? If a newer model has come along at a cheaper rate, your car’s value won’t hold up as well. Make sure you know what dealers are asking before you demand full value, and keep in mind that the dealer wants to make money from the transaction, too.

Beware the terms of your purchase if you haggle over trade-in value.

In some ways, it’s almost better to treat a new purchase and a vehicle trade-in as different transactions. Before you discuss your trade-in value, make sure you know the cost and terms of your new vehicle. Many dealers are willing to offer more for trade-ins if they can make the money up by charging more on the new car, so be wary of this tactic and beware a change in cost or terms if you press the point of trade-in value.

Don’t be afraid to shop around.

Dealers with different inventories may be willing to make different offers on trade-in value. If one dealer is unwilling to pay you what your trade-in is worth, go to another dealer. You may get a different offer, if the new dealer has more of a demand for your vehicle on his lot. A good rule of thumb is to try three different dealers to get a feel for market value before making a decision about trade-in value.

Car dealerships have gotten, and continue to get, a bad rap. The truth is that the majority of dealerships are honest and reputable, but it only takes a single bad experience to perpetuate the myth. Even so, it couldn’t hurt to be a smart consumer, just in case you visit that one dealership in your neighborhood which gives credence to the claim that car dealers are not honest.

Car dealers have a tendency to look smarmy; always smiling and grinning, bobbing their head up and down like one of those brown velvet bobble-head dogs you see in the back of big old Buicks. But I can deal with all that; I know that most of them see us only as dollar signs, a commission waiting to be gained. A good haggler will be able to see through the charm, and get a good deal on the price of the car.

But what if you not only want a good price on a car, but a good interest rate on the car financing? And what if your credit stinks? That smarmy smiling dealer will tell you, “Not a problem.” But, don’t be fooled. Yes, it is.

A disreputable car dealership may be setting you up for what is known in the scamming circles as “yo-yo financing.” You know how a yo-yo works, right? The yo-yo goes down, then comes right back up.

How the scheme works is this. Your credit stinks, but your dealer assures you that you’ve pre-qualified for an excellent interest rate, so you can just drive right on off the lot with the car of your dreams, and they’ll get the loan documents prepared in a couple of days and you can come in and sign them then. You’ll hear a lot of “Don’t worry” and “No problem.”

Now, you are psyched! When the dealer gave you the good news, you might have raised your eyebrows a bit, but then you started thinking to yourself, “Wow, I didn’t even think I was gonna be approved. Man! This place is great!” And the dealer is looking first at the incredulity on your face, then at your joy, and he’s thinking, “Heh, heh, heh! I got you! Sucker.” Before you even have the chance to think all this through, the dealer has put a temporary plate on the car, so that you can take it home.

So, off you drive with your dream car, showing it off to your buds, racking up the miles, enjoying the good life. And a couple of days later the phone rings. It’s the dealer and he says, “There’s a little bitty problem with your loan application”. And he goes on to say that they can’t give you the rate that they thought they could give you, it’s gonna be a bit higher than that – in truth, maybe even more than just a bit, maybe a lot higher. The only thing you can do now is to go back to the dealership, give them some more money towards your down payment (because you have, after all, used the car and it cannot be returned to the dealer. If you don’t come up with the money within a couple of days, they’ll come after you.

What choice have you got? You’ve taken possession of the car already. It’s yours, for better or for worse. You took the bait, remember?

Before you put yourself into that situation, consider this advice: Don’t drive the car off the lot until you’ve completely read through, fully understand, agree to all terms and conditions, and signed the loan documentation. And most importantly, watch for the “yo-yo” disclaimer, usually written in bold print, which basically states the dealer has the right to rescind the contract if they cannot find a lender who will agree to the original financing terms.

Best advice: Leave the business of lending to a reputable lender, not a car dealership.

-- Debt Diva for DebtStoppers