The Finances and Debt Thread

[Zog]

Unfortunately no. Was gonna open one in my wife's name, but also looking at other retirement options. That's likely where a large portion of this money will go.

Any thought?

I would say she should open a Roth IRA. General rule of thumb is fund 401k to get company match, then the Roth IRA, then back to 401k assuming you have enough money available still.

Depending on the interest on her loan it may not be bad to focus on that. If it’s 5+% I would go with paying down the loan before investing.

Goddamn, opened up a secured credit card and a share secured loan and my credit went from 586 to 621 literally in a week.

Have you ran a credit report recently? I’d be surprised if you credit went up after opening new lines, usually it will go down with hard pulls. It could just be that your score went up before opening the new lines and the effect of those lines hasn’t kicked in yet.

 

[The Oi]

Would have to have been that he was looking at a different bureau or the other possibility is that if it was the same bureau, the first time around it was a credit karma type of soft pull and the second one was the hard pull or vice versa.

A hard pull will definitely drop your credit. And taking out an additional line won’t help until you start paying on it. At which point, a few months in after some payments it will definitely help.

For someone like @David. who is in the low 600s he is probably down there due to (just guessing here) one or more of the following: late payments or repo on a car, collections, late payments on credit card. Student loans will blast your credit up fast FYI and will those other items after a few months.

 

[David.]

Ye

I would say she should open a Roth IRA. General rule of thumb is fund 401k to get company match, then the Roth IRA, then back to 401k assuming you have enough money available still.

Depending on the interest on her loan it may not be bad to focus on that. If it’s 5+% I would go with paying down the loan before investing.



Have you ran a credit report recently? I’d be surprised if you credit went up after opening new lines, usually it will go down with hard pulls. It could just be that your score went up before opening the new lines and the effect of those lines hasn’t kicked in yet.

Yes. I did not have any lines of credit previously and the two new ones are secured and I've made payments on them.

 

[The Voice]

Would have to have been that he was looking at a different bureau or the other possibility is that if it was the same bureau, the first time around it was a credit karma type of soft pull and the second one was the hard pull or vice versa.

A hard pull will definitely drop your credit. And taking out an additional line won’t help until you start paying on it. At which point, a few months in after some payments it will definitely help.

For someone like @David. who is in the low 600s he is probably down there due to (just guessing here) one or more of the following: late payments or repo on a car, collections, late payments on credit card. Student loans will blast your credit up fast FYI and will those other items after a few months.

I was told by my credit department at work, a hard pull won’t do much unless you have several.

 

[The Oi]

I was told by my credit department at work, a hard pull won’t do much unless you have several.

They’re correct that it won’t do much. One pull will do a couple points. A few pulls can do some damage.

It’s when people go to car dealerships and they shotgun your credit that people will lose signicant points.

 

[Pick6]

It’s when people go to car dealerships and they shotgun your credit that people will lose signicant points.

This says otherwise.
https://www.experian.com/blogs/ask-experian/multiple-inquiries-when-shopping-for-an-car-loan/
https://www.quickenloans.com/blog/myths-facts-credit-pulls-credit

 

[The Oi]

This says otherwise.
https://www.experian.com/blogs/ask-experian/multiple-inquiries-when-shopping-for-an-car-loan/
https://www.quickenloans.com/blog/myths-facts-credit-pulls-credit

Could be right but I’ve found that from seeing thousands of people’s bureaus over the years, the only explanation for drops in credit over a short period of time would be shotgun pulls.

Lot goes into credit though month to month. I should confirm with the bureau though. I’d rather not be wrong on that. Thank you.

 

[The Oi]

This says otherwise.
https://www.experian.com/blogs/ask-experian/multiple-inquiries-when-shopping-for-an-car-loan/
https://www.quickenloans.com/blog/myths-facts-credit-pulls-credit

This is correct. It’s when people go shopping for other credit items as the car where they get hit. Even then it’s temporary. It also applies to all three bureaus.

I was wrong.

 

[David.]

Is there any way to effect the amortization of the loans I'm paying back? Like pay back the principal faster than im paying on the interest?

 

[The Process God]

Is there any way to effect the amortization of the loans I'm paying back? Like pay back the principal faster than im paying on the interest?

Yes. It's all about paying the loan back as fast as possible (obviously), and, any time you make a payment, the amount of the payment that goes towards interest is dependent on the interest rate and how much time has passed since the last payment. Generally, amortized loans have a daily interest rate, so, each day that passes will cause one more 365th of the interest rate apply towards interest vs principal. For example, a $10,000 loan with a 5% interest rate will have a daily interest rate of 0 0137%, which would cost about $1.37 in interest daily.

So, after letting 30 days pass, then making your first payment, you would owe $41.10 in interest, so, whatever your payment amount is each month, interest is always paid first. However, any additional capital applied against the loan beyond the minimum payment is applied 100% towards principal because the interest has been 100% been paid up until that point via the first $41.10 of your payment. It's all about the time-value of money--- a dollar today is worth more than a dollar tomorrow because of the power of interest (especially compounding interest), so getting the lender their money back ASAP will reduce that interest.

Also, the APR (which is the amount of total interest owed on a loan in a year time span when accounting for compounding and capitalization, reflected as a percentage of principal) will be dependent on whether the plan's rate of capitalization or how often a loan turns owed interest into principal and starts charging interest on the new, higher amount loan. Generally, installment loans have either no capitalization or slower rates of capitalization than, say, credit cards, who capitalize monthly at the very least or even daily. If that $10,000 loan example I used were to compound daily, then you would owe $41.18 in interest on the first payment after 30 days, not $41.10). Amortizing loans usually keep the principal amount the same and then vary the amount of any given payment thst goes towards interest based on the time between payments and interest rate. So, with each payment, the rate at which you accrue interest goes down because the interest rate is now being applied against a smaller principal.

Tl;DR - pay as much as you can as fast as you can

 

[David.]

Yes. It's all about paying the loan back as fast as possible (obviously), and, any time you make a payment, the amount of the payment that goes towards interest is dependent on the interest rate and how much time has passed since the last payment. Generally, amortized loans have a daily interest rate, so, each day that passes will cause one more 365th of the interest rate apply towards interest vs principal. For example, a $10,000 loan with a 5% interest rate will have a daily interest rate of 0 0137%, which would cost about $1.37 in interest daily.

So, after letting 30 days pass, then making your first payment, you would owe $41.10 in interest, so, whatever your payment amount is each month, interest is always paid first. However, any additional capital applied against the loan beyond the minimum payment is applied 100% towards principal because the interest has been 100% been paid up until that point via the first $41.10 of your payment. It's all about the time-value of money--- a dollar today is worth more than a dollar tomorrow because of the power of interest (especially compounding interest), so getting the lender their money back ASAP will reduce that interest.

Also, the APR (which is the amount of total interest owed on a loan in a year time span when accounting for compounding and capitalization, reflected as a percentage of principal) will be dependent on whether the plan's rate of capitalization or how often a loan turns owed interest into principal and starts charging interest on the new, higher amount loan. Generally, installment loans have either no capitalization or slower rates of capitalization than, say, credit cards, who capitalize monthly at the very least or even daily. If that $10,000 loan example I used were to compound daily, then you would owe $41.18 in interest on the first payment after 30 days, not $41.10). Amortizing loans usually keep the principal amount the same and then vary the amount of any given payment thst goes towards interest based on the time between payments and interest rate. So, with each payment, the rate at which you accrue interest goes down because the interest rate is now being applied against a smaller principal.

Tl;DR - pay as much as you can as fast as you can

But there's no way to restructure how I'm paying back to distribute more towards the principal? Or are They just taking a set amount of interest and everything in excess goes to principal

 

[The Process God]

But there's no way to restructure how I'm paying back to distribute more towards the principal? Or are They just taking a set amount of interest and everything in excess goes to principal

There is no way for more to go towards principle unless you are able to refinance with a lower interest rate. You always pay the interest accrued between payments, then whatever you have paid over that interest is going towards principle. You could offer to restructure your loans for a faster payback timeframe (say 36 months vs 72, for example) to potentially get a lower interest rate if you can't qualify for a lower interest rate with a longer payoff period.

 

[The Voice]

But there's no way to restructure how I'm paying back to distribute more towards the principal? Or are They just taking a set amount of interest and everything in excess goes to principal

What are you paying off?

 

[David.]

What are you paying off?

Mountain of student loans

 

[The Voice]

Mountain of student loans

Do you care about your credit? Also this might be considered defrauding financial institutions, so do you mind possibly being charged with a crime?