Need advice on buying a Kirkham cobra

[Igofastr]

Well, those of us who exercise financial restraint are clearly in the minority in this country. No doubt, we'll be funding the bailout caused by those who don't.

That said, we will also be funding the retirement and healthcare of many of those same people (expect mean-testing for both social security and Medicare/Medicaid in the future).

In my opinion, there are only two cases where debt is reasonable...education and mortgage for a residence. Otherwise, if you can't afford to pay cash, you can't afford it.

[RodKnock]

There is absolutely nothing wrong with financing a car purchase, especially using a HELOC, depending on one's financial and employment pictures. What if this person has money tied up in Treasuries, stocks, bonds, gold, pork bellies, has adequate life insurance, kid's go to State schools or their education is being funded by a 529 plan or similar method? Blah, blah, blah. It all depends, but prudent and reasonable leverage is just fine.

I took out my Kirkham yesterday aftrenoon for a 100-mile drive. Loved every minute of it. It almost makes me forget about the money spent on it.

[SP01715]

Originally Posted by RodKnock

There is absolutely nothing wrong with financing a car purchase, especially using a HELOC, depending on one's financial and employment pictures. What if this person has money tied up in Treasuries, stocks, bonds, gold, pork bellies, has adequate life insurance, kid's go to State schools or their education is being funded by a 529 plan or similar method? Blah, blah, blah. It all depends, but prudent and reasonable leverage is just fine.

I took out my Kirkham yesterday aftrenoon for a 100-mile drive. Loved every minute of it. It almost makes me forget about the money spent on it.

My financial guy had the same theory. I did not listen to him because I did not want to leverage toys to the point that I could not dump them without taking more cash out of my pocket. I paid cash for most of the stuff I own, and I have actually probably lost less money than if I would have left it in stocks. The only exception was a 250K boat that I put 100k down on because it was a write off, and I was still not upside down in it.

The problem is a lot of people were not reasonable when it came to using their house as a credit card.

[jhv48]

You only gamble with your house (which is what you are doing with a HELOC)
if you can afford to lose it!

Buying a toy or a vacation, or furniture, or a swimming pool using a HELOC is a gamble. You are betting that the interest rate (which is adjustable on a monthly basis) won't climb too high before you can either pay it off or re-fi the house to include it. Easy to do when values are climbing steadily. Tough to do today with values actually declining.

Millions of people gambled and are losing their homes because of it. If we learn nothing from this crisis, then we are doomed to repeat it.

Just don't expect me to come to your aid when you go belly up.

Banks invented the HELOC to entice us to spend our home equity on crap we can't afford otherwise. Next they will try and tap into our automobile equity in order to allow us to dig our hole even deeper.

Banks love debt. Ours, not theirs!

It's time to think outside the box. Obviously if banks want us to do it, it is good for THEM!

[SP01715]

Originally Posted by jhv48

You only gamble with your house (which is what you are doing with a HELOC)
if you can afford to lose it!

Buying a toy or a vacation, or furniture, or a swimming pool using a HELOC is a gamble. You are betting that the interest rate (which is adjustable on a monthly basis) won't climb too high before you can either pay it off or re-fi the house to include it. Easy to do when values are climbing steadily. Tough to do today with values actually declining.

Millions of people gambled and are losing their homes because of it. If we learn nothing from this crisis, then we are doomed to repeat it.

Just don't expect me to come to your aid when you go belly up.

Banks invented the HELOC to entice us to spend our home equity on crap we can't afford otherwise. Next they will try and tap into our automobile equity in order to allow us to dig our hole even deeper.

Banks love debt. Ours, not theirs!

It's time to think outside the box. Obviously if banks want us to do it, it is good for THEM!

Great post...

And I actually know someone that tried to take equity out of a car. He could not find a bank that would do it.

[jhv48]

[quote=RodKnock;891778]There is absolutely nothing wrong with financing a car purchase, especially using a HELOC, depending on one's financial and employment pictures. QUOTE]

Yes there is. A HELOC has a variable interest rate and the sky is the limit on how high it can adjust (gambling again).

Why not get a simple auto loan with a fixed interest rate for the life of the loan?

[mln385]

Originally Posted by jhv48

You only gamble with your house (which is what you are doing with a HELOC)
if you can afford to lose it!

Buying a toy or a vacation, or furniture, or a swimming pool using a HELOC is a gamble. You are betting that the interest rate (which is adjustable on a monthly basis) won't climb too high before you can either pay it off or re-fi the house to include it. Easy to do when values are climbing steadily. Tough to do today with values actually declining.

Millions of people gambled and are losing their homes because of it. If we learn nothing from this crisis, then we are doomed to repeat it.

Just don't expect me to come to your aid when you go belly up.

Banks invented the HELOC to entice us to spend our home equity on crap we can't afford otherwise. Next they will try and tap into our automobile equity in order to allow us to dig our hole even deeper.

Banks love debt. Ours, not theirs!

It's time to think outside the box. Obviously if banks want us to do it, it is good for THEM!

Just an FYI you can get an equity loan with a fixed rate..

[RodKnock]

Originally Posted by mln385

Just an FYI you can get an equity loan with a fixed rate..

...and the variables that I've seen have floors and caps.

[jhv48]

Still not a smart move to gamble your house on buying a car. With either of those loans, you are putting your home up as collateral. And you can see how that has worked out for thousands of Americans.

Why not go to your credit union and get a signature loan against your savings or your 401k?

Once again, we have been led like sheep, by the financial institutions, to bleed our home equity dry in order to afford a lifestyle we have been brainwashed into thinking we must have. Where do you think the leasing industry came from? Some genius thought of a way for us to rent the things we couldn't afford to buy.

And we fell for it!

[jhv48]

Originally Posted by RodKnock

...and the variables that I've seen have floors and caps.

No they don't, HELOCs are based on the prime rate plus or minus a specified percentage. Prime goes up, during inflationary times, so does your payment. They can go up or down whenever the prime rate changes. No caps or limits.

[patrickt]

Don't bother with a HELOC, just give Benny a call... http://www.nypost.com/seven/10132008...ark_133385.htm

[jhv48]

Originally Posted by patrickt

Don't bother with a HELOC, just give Benny a call... http://www.nypost.com/seven/10132008...ark_133385.htm

Now you're talking. Don't bet the house. Just your kneecaps!

[RodKnock]

Originally Posted by jhv48

Why not go to your credit union and get a signature loan against your savings or your 401k?

So, instead of your house, colateralize the loan with you savings and 401K?

Yes, on floors and caps. Every lender is different and every customer is different. Lending is based on FICO's.

Again, assets minus liabilities equals net worth. We do not have a complete picture of the borrower/Kirkham buyer. So, blame the 98% of the rest of us for the excess of the 2%.

Reasonable and prudent leverage is fine.

[ng8264723]

I paid for most of my car in cash. I actually put $20 on a HELOC. I have paid it down to $15 and will have it paid off in a few months. I have $74 on the HELOC but most of it ($54) is for home improvements. In my field though I can afford to pay it down fairly quickly. I have as much OT as I need. I didn't want to wait anymore on the car.
chris

[Dingocooke]

My opinion pretty much all debt is bad debt for the borrower; if you borrow money to buy a non essential toy; the mental burden of the debt usually lasts longer than the joy of owning the toy.

As others have said, if you cant afford to pay for it, then you cant afford it.

Mind you the current situation is not all about sub prime loans; the banks and financial institutions have been stupid on many levels; too many credit card approvals to people who cant afford to pay, and way too much risky trading with bank (aka your savings) funds; why else are most of the major world banks begging for state bail outs?

My toys, paid for cash after long saving and building up to the stuff I have now; hard work feels better than instant finance; but maybe Im old fashioned!

Remeber though, even paid for cash its no investment. If I borrowed money for a Kirkham (or whatever) I wouldnt be able to look at it without feeling the debt burden; borrow in haste regret for years? Probably.

My take? There are some great bargains around used, and logic says there will be some reall steals as the situation really bites; look into your finances and what you can really afford to spend (not borrow) and go from there.

Probably not what you wanted to hear, but thtas how I see it; have fun and hope you make a decision you are happy to live with.

Steve

[jhv48]

Originally Posted by RodKnock

So, instead of your house, colateralize the loan with you savings and 401K?

Yes, on floors and caps. Every lender is different and every customer is different. Lending is based on FICO's.

Again, assets minus liabilities equals net worth. We do not have a complete picture of the borrower/Kirkham buyer. So, blame the 98% of the rest of us for the excess of the 2%.

Reasonable and prudent leverage is fine.

So you would rather lose your home (and uproot your family) than your savings account? If you use savings to guarantee a loan and get into a situation where you can't repay the loan, then the lender takes what is owed from the guarantee account. If you could have paid cash in the first place, you won't mind having them take it from savings.

If you can't pay back a HELOC, YOU CAN LOSE YOUR HOME! Ask your wife which one she would prefer.

Why would anyone want a variable interest rate to purchase a car. That 4% rate right now could be 9% in a year with no end in sight.

If you must borrow money to purchase the car, put up a large down payment and get an old fashioned car loan with a fixed rate and be done with it! No surprises, and if the worst happens, you will only lose the car, not your home!

No brainer!

[Got the Bug]

Originally Posted by RodKnock

: Again, assets minus liabilities equals net worth. We do not have a complete picture of the borrower/Kirkham buyer. So, blame the 98% of the rest of us for the excess of the 2%.

Reasonable and prudent leverage is fine.

Agree with Rodney 100%

This is a circular conversation. One size doesn't fit all and each person's financial situation is different.

I've leveraged a HELOC many times over the years, but I've always balanced that with the knowledge that I could liquidate other assets to pay off the equity line if needed. You just need to be disciplined and pay down the principle. I'm also the guy who always takes advantage of 24 month 0% financing for large purchases, because I know I'm going to pay it off before the interest kicks in.

[mln385]

Originally Posted by Got the Bug

Agree with Rodney 100%

This is a circular conversation. One size doesn't fit all and each person's financial situation is different.

I've leveraged a HELOC many times over the years, but I've always balanced that with the knowledge that I could liquidate other assets to pay off the equity line if needed. You just need to be disciplined and pay down the principle. I'm also the guy who always takes advantage of 24 month 0% financing for large purchases, because I know I'm going to pay it off before the interest kicks in.

Exactly.....

use the tools of finance to your advantage....
Here are 2 scenarios.

1 an individual has the cash to buy a 100k car plus say 10% extra for unforseen issues.
So they buy the car and have 10k left over,said person then looses job or becomes seriously ill and can't work for months no income.
Now said person goes thru said 10k left over in a couple months and is now broke can't pay bills what does he do??

2 nd individual has the cash to buy 100k car but elects to keep it invested or in a cd, takes out "fixed" equity loan which is also tax deductable.
So they buy the car said person then looses job or becomes seriously ill and can't work for months no income.

However said person has the 100k in bank or security's to ween off of untill things get better.

I ask you who is better off in this situation 1 or 2??

[392cobra]

3rd Sell the car ???

[RodKnock]

Originally Posted by jhv48

So you would rather lose your home (and uproot your family) than your savings account? If you use savings to guarantee a loan and get into a situation where you can't repay the loan, then the lender takes what is owed from the guarantee account. If you could have paid cash in the first place, you won't mind having them take it from savings.

If you can't pay back a HELOC, YOU CAN LOSE YOUR HOME! Ask your wife which one she would prefer.

Why would anyone want a variable interest rate to purchase a car. That 4% rate right now could be 9% in a year with no end in sight.

If you must borrow money to purchase the car, put up a large down payment and get an old fashioned car loan with a fixed rate and be done with it! No surprises, and if the worst happens, you will only lose the car, not your home!

No brainer!

But what if his savings and 401K plan are worth more than the house?

In life, you need to strike a smart balance between your IQ (Intellectual Quotient) and FQ (Fun Quotient).

Obviously, don't lose you house over not making the car payment. Oye vey.