'Good' debt vs. 'Bad' debt

iVillage Member
Registered: 03-31-2003
'Good' debt vs. 'Bad' debt
15
Mon, 08-30-2004 - 9:50am
I remember when I was on this board for the past few years, with a hefty $24K in credit card debt, with barely anything to show for it besides $400/monthly INTEREST payments alone.

Some nice lady would come on the board and say, 'oh dear, I owe $xxx for my brand new lincoln continental, and $xxx for my new vacation villa in Spain' and I'd say to myself, 'lady, get over it'.

Here I am though, debt free for months, and buying a new car. 'Oh dear, I'll have debt again'...tee hee hee!

According to Jerrold Mundis though, this is 'good' debt, because my car is the collatoral on the loan. If I don't pay, they get the car back. So it's more of a swap than a debt. Swapping a loan for a car.

It's still debt to me though, and I want to wipe it out as fast as I can, so I'll be snowflaking my dance income to the car payments. Car payments!?!?! I haven't had a car payment in 4 years!! ugh...

Glad to be back??

Have a great day,

Lee Ann

Lee Ann

www.werenotafraid.com

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iVillage Member
Registered: 04-30-2003
Mon, 08-30-2004 - 2:12pm

WEll, you can always think of it as debt to help your credit? lol. But I hear ya. I don't want ANY debt, but I tell ya, having had 4 car loans, is a blessing. Mostly because it makes my credit look awesome and I can get some GREAT lease deals with that info. lol. Have a mortgage is great too. Shows I had one, and paid it off.


Good luck with the snowballing of your car payments.


I know for myself, I'll be leasing for the rest of my life, so I'll always have that debt. lol.

~Cher




my pet!

Avatar for zaboz
iVillage Member
Registered: 03-26-2003
Mon, 08-30-2004 - 2:12pm
Yeah, I think it's debt, particularly if the amount you owe is more than the car is worth. How many people have you seen come on the board and say they have a huge car payment that they can't afford, but they can't sell the car either because they owe more than it's worth?

Translation...buy a Mercedes Benz or another type of car that holds it value. Bah haww haaw. ;) Just kidding. But there is something to be said for buying under blue book value and buying a car with a good reputation that will have good resale value.

I think it's sort of neutral debt. I think of bad debt like credit cards, with nothing at all to show for it. Neutral means you have something to show for it, although it's worth about what you owe. Good debt is debt for something that will increase in value or pay off over time, like real estate or *maybe* your education if it helps you earn more or if it increases the quality of your life.

Now where do the new windows that I want fall?? :) Will they come rip those out if we can't pay for them? Are well-insulated windows "good" debt and a remote control skylight "bad" debt? :)





Edited 8/30/2004 2:14 pm ET ET by zaboz

Avatar for cl_beckymk
iVillage Member
Registered: 03-19-2003
Mon, 08-30-2004 - 3:14pm

Welcome???? back.


iVillage Member
Registered: 05-30-2003
Mon, 08-30-2004 - 5:10pm
Yup, I'd call it debt, and not necessarily good-I don't know if there is such a thing a "good" debt, lol!


Can you save up a bunch for a good-sized downpayment? Or to outright buy the car? The power of cash is great, the power of financing not so good. I agree with Zaboz-too many times people get stuck with a car that they owe more on than it's worth, which doesn't sound like a great thing to me.

Good luck to you-yeah, that Mercedes *does* sound good!

Lisa :)

iVillage Member
Registered: 03-31-2003
Tue, 08-31-2004 - 8:42am
Yes, I'm feeling a little guilty because since it will take a week for my new car to be ready, DH spent all weekend long replacing the fuel filter and EGR valve, and now my old car runs beautifully. He's still glad I'm getting a new one though, 144,500 miles is good enough for him :-)

Lee Ann

Lee Ann

www.werenotafraid.com

iVillage Member
Registered: 03-31-2003
Tue, 08-31-2004 - 8:47am
Hi Lucky,

I did manage to save up $500, rather painlessly too! Every month I just put $35 into my ING Direct account, and when I looked at it the other day, there was $500 in there!

I also took half a $10K inheritance, so I'm putting $5K down on the car. They wouldn't give me anything for a trade in because my old Saturn has so much mileage, so we'll try to sell it for a couple of weeks, then donate it and take the tax deduction if it doesn't sell. Book value of my old car is $2,090, and we're asking $1,550, so we hope it sells fast. I posted it for sale on boston.com, and cars.com.

I don't know what book value of my new car is, but my loan will be $17K, or $338/month. I was putting $340 into Savings every month, so worst-case, I'll skip a savings deposit. I don't think I'll have to though, the car payment is only a little over 6 dance lessons taught. The new housecleaners I hired are 5 dance lessons taught, so teaching 11 lessons/month will pay for my new luxury items no problem. I've already got 15 lessons booked for September. Now that I have a 'quota' to fill, I may actually have to do some marketing, ha ha ha!!

Have a great day,

Lee Ann

Lee Ann

www.werenotafraid.com

Avatar for zaboz
iVillage Member
Registered: 03-26-2003
Tue, 08-31-2004 - 12:54pm
Lee Ann,

You don't know the blue book value of your new car??

Have you checked out www.kbb.com? You can find it there

and be sure you're not paying too much.

Let's see...2005 Mercedes Benz...just kidding!

iVillage Member
Registered: 03-31-2003
Tue, 08-31-2004 - 4:50pm
I tried to price it with options from that link, but operator error couldn't get a final price.

But I know I didn't pay too much, because I got a Saturn. I pay the MSRP plus a $625 fee. They make buying a new car the pleasure it should be. :-)

Lee Ann

www.werenotafraid.com

iVillage Member
Registered: 08-15-2004
Tue, 08-31-2004 - 10:26pm
Hi Lee Ann,

In your first message you said you remembered coming here in $24k worth of debt and are now debt free. Well, until you get the car.... :-)

What did you do to get out of debt and how long did it take?

Just curious.

~Nancy

iVillage Member
Registered: 05-30-2003
Wed, 09-01-2004 - 12:26am
I drive a Saturn too! It's a 'hand-me-down' car from DH's older sister. When she decided to get a new one, she gave us first crack at buying it from her. Best of all, because she was able to get the 0%/5 year loan, she passed the savings down to us-We get a 0% loan also.

I'm pretty sure we're going to drive it until it just won't go anymore, but from what I understand, it may be awhile! I think we just got past 107,200 miles, and it's a '96. Of course, it *does* sound remarkably like a couple of hamsters and a squirrel... :D

Lisa

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