Personal Finance

Money 911: Buying a Leased Car, Student Loans and Bill Misery

Comments 10 Comments

On this morning’s Money 911 on the NBC Today Show, I joined personal finance guru Jean Chatzky and David Bach, author of the new book Debt Free For Life, to answer viewers’ questions.

Visit msnbc.com for breaking news, world news, and news about the economy

My question came from Vicki in Philadelphia who asked:

I was able to pay my bills with my unemployment check and a part-time job. Now, I have exhausted all of my unemployment benefits and my only income is the part-time job which is not enough money to pay all of my bills. I have a mortgage, credit cards and high utility bills because I live in the northeast and we’re in the winter season. My part-time job cannot cover the mortgage. I tried to refinance to a lower mortgage rate (I have excellent credit) but could not because I don’t have a “job.” Something has to give. So which bill should I let become delinquent first?

I ate up quite a bit of time answering Vicki’s question, as you can see in the clip. I just didn’t want to give her an easy out and let her bills slide. Instead I first want her to try to exhaust as many free resources both online and offline to get her some help with day-to-day-expenses. Here’s the outline of my plan for Vicki and likely many people at home who are struggling with a lack of income and far too many monthly expenses at the moment:

1. Contact a Local Credit Counseling Agency.  What many people don’t realize is that these agencies are often tied into local social service organizations that may be able to offer assistance with things like food and utility bills, says Credit.com‘s own Gerri Detweiler. And if the counseling agency is HUD approved, they can possibly help Vicki with her mortgage. You can find a local agency through the National Foundation for Credit Counseling.

2. Check Out the Unemployment Lifeline. This is a free service that can, like the credit counseling service, connect you with social service agencies within the community that offer help paying for utilities, groceries, health care, you name it.

3. Call Your Mortgage Lender. While Vicki may not qualify for a traditional refinancing due to her lack of income, she may qualify for a modification of her loan through the Home Affordable Modification Program. If her mortgage, interest and taxes adds up to more than 31% of her monthly gross income, she may very well be eligible for this federal program.

4. Call Your Credit Card and Utility Company. Because Vicki lost income she may be eligible for a hardship program offered by many card and service companies. When a friend of mine lost her job last year she called her insurance companies, utility firms, cable company, and others to try to negotiate lower rates. She was pretty successful in many cases. Be honest about your circumstances. You may be able to pre-emptively get what you need without having to go delinquent on your bills.

5. If All Else Fails…Sideline Your Credit Card Payments. As far as letting bills slide, the credit card bills are probably the first she’d want to stop paying. Even though her credit will suffer, and the card companies will start calling, it is unlikely anything dire will happen in the short term, says Detweiler. Her interest rates will skyrocket when she goes into default after 60 days delinquency and her credit will suffer. But credit cards are unsecured loans, so no one’s going to take her house or turn off her heat if she doesn’t pay them back.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Pingback: Money 911: Buying a Leased Car, Student Loans and Bill Misery – Credit.com News (blog) | Department of Education Student Loans

  • Pingback: Money 911: Buying a Leased Car, Student Loans and Bill Misery – Credit.com News (blog) | Refinancing Student Loans

  • cathy

    I WONDER IF ANYONE GETS TO REFINANCE. wE FILED cHAPTER 7 BANKRUPTCY LAST YEAR., WE TRIED TO REFINANCE THIS YEAR WITH CHASE BANK, THE HOLDER OF OUR MORTGAGE, WE ARE NOT ELIGIBLE, WE HAVE NOT BEEN LATE WITH OUR PMT BUT ARE STRUGGLING. WE WERE TOLD THAT MAYBE NEXT YEAR…WE ARE SENIORS WITH OUR PROPERTY TAXES INCREASING, AND NO RELIEF IN SIGHT…WE HAVE HELPED OUR DAUGHTER AND HER CHILDREN.BY HAVING THEM MOVE IN WITH US, ..SHE NOW HAS A JOB…WHAT SITUATION MUST YOU BE IN TO HAVE THE ADVANTAGE OF REFINANCING? IT SEEMS ITS ALL A FANTASY,SOMETHING IN THE WIND.

    • keith green

      Look at that reverse mortgage ! Or sell your home.

  • KE

    Why are student loans mentioned in the headline? They aren’t mentioned anywhere in the story.

  • http://pencecapitalist Dan

    Ditto for being seniors attempting to refinance mortgage, Cathy. With good credit, it really surprised us last year being rejected for refinance after a costly exhaustive exercise that bordered on harassment. Just not enough income, we were told finally. I, too, asked, is anyone getting these loans? Except those who don’t really need the extra money in the first place?

  • Mimi

    Cathy: Go to NACA.com: (1) go to a local event (“workshop”) for information and speak with the counselor as well. They have a LOT of information that can help you. Additionally, go to one of their big events, held all over the US. But get there EARLY as thousands attend. Their site says: “NACA is planning twenty Save-the-Dream events nationwide. These are the most successful foreclosure prevention events attracting thousands of homeowners with many receiving same day solutions with many saving $500/month and some over $1,000/month. They begin January 20th in Los Angles. See the press of our previous west coast tour”

  • http://HennessyJaguarAtlanta Mike Escoe

    This is a quick note on purchasing a car at the end of a lease. Part of the definition of a closed-end lease is that the residual value at the end is set at the beginning of the lease. Therefore, you know exactly what you can buy the car for at the end. That’s part of the beauty of a lease – the bank takes the risk on the value at the end. So if it’s worth less at the end of the lease in the real world than the residual value, turn the car back in and get another one or something else. Yes, it is possible to negotiate a lower price, but it’s certainly not a given and it’s not completely up to the dealer – the dealer is told the lowest price possible by the leasing company. And in some cases, the price can actually be higher. If your particular leased vehicle has very low miles for instance, the lease-end price you pay could actually be lower than the price the dealer can buy it for as the lower miles actually raise the value from that which was estimated at the beginning of the lease. Also, most manufacturers offer a much lower interest rate for these purchases than you’d find anywhere else. For instance, Jaguar is currently offering 2.9% on vehicles purchased off lease on year models 2005-2008. One last thing, if you leased a car, you’ve already paid interest and fees for the duration of that lease. If you have the cash and it’s not invested in a higher percentage yield than the lowest interest rate you can find, then why would you pay more fees and additional years of interest?

  • http://postal.com Virginia

    Cathy, I think that was a crappy answer you were given. You ask about refinancing because of the money drain. One thing may help. See if there is a tax cap for you. I live in Florida and I have a cap on my property tax. I went to the tax office and applied. Also, if your bills are way more than you can afford, certainly talk to people. Your mortgage company will probably give you a couple of months to pay interest only and get yourself in better shape. I don’t know how that would affect your refi for next year though.

    Good Luck

  • sean

    The “credit counselors” are all working with the credit card companies to get you to stop using bankruptcy as an option, there advise is always questionable

  • Michelle

    I had the same problem. Lost my job and was paying everything from my husband’s check and unemployment. Cut al my expenses to necessaties. Applied for the HAMP to try to get a lower payment or interest rate. You send them all this info and I already knew I was within the range to qualify. They of course turned me down stating that I have never been late on my mortgage. OK..well I send the payments in by the 15th..not the 1st..so technically I am. They charge me the late fees every month. Well, it sucks cause I was actually late in December. I send my payments in separate amounts so I don’t spend the month on something else and they applied to late fees instead of mortgage that was due. I quickly received a letter stating that If did not pay the past month and this month by the 15 that I would loose my house. You try to follow the rules for getting help and it seems they use it against you. Thankfully a call and a rare helpful customer service person helped me reverse the payment and apply correctly..but I still have to send in the next payment in two weeks..so that entitles no extra money..which isnt’ alot..but no emergencies can come up..because there is no cushion. I am nervous every month about loosing my home. You never know in this economy…no one is safe from losing their home. Who do we complain to about the abuse that is going on with these programs that are supposed to help people and they take your application and all your info and use it against you to take your home. :-( Thanks, Good Luck to everyone out there in the same boat.

  • Michelle

    I was able to get my credit cards down and pay only 40% if the balances back to the companies…thankfully I did this before I lost my job. I have two cards that i am working on paying down and I do it on my terms…not theirs. i avoid calls so it doesn’t stress me out. I watch alot of Dave Ramsey:-) he helps alot.

Find out where you stand.
Get your FREE personalized credit report card.

Sign Up Now
X

Stay connected to our experts

Please submit your email address to get credit & money tips & advice
from our team of 30+ experts, delivered weekly to your inbox.