For anyone thinking of taking out a loan

ATN_Pilot said:
Amen, brother. As we speak, money sitting in savings accounts is losing 1.5% of its value per year. Most years it's closer to 3%. My 401k money is accessible within 24 hours in the form of a loan if I need emergency money, and I've got tens of thousands of dollars available on credit cards if I need money instantly. I'll never understand how someone can leave so much money sitting in an account that is guaranteed to lose value, all for an emergency situation that is incredibly unlikely to happen.
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I'm not losing money to inflation with having money in a savings account, I'm purchasing peace of mind so that when the company doesn't pay me properly, all of my bills will still get paid.
 
ATN_Pilot said:
Actually, it's very common for people who have credit scores above 680. Banks love to loan us money at low rates, because they know there isn't the slightest chance in hell that we won't pay it back, so they're making a zero-risk investment. It's win-win. I get incredibly cheap money, and the bank makes a modest return for zero risk. I know people who have started their entire real estate investment portfolio off of revolving credit card debt at practically zero interest. It's enough to make a Ramsey disciple's head explode. But that's why the Ramsey disciple has a net worth of $20k, and the investor with the revolving credit line has a net worth in the hundreds of thousands.
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How do these people do this? How does one transfer money off of a credit card without being charged the cash advance rate? If I needed money I could borrow as much as half of my interactive brokers margin portfolio within 24hrs at a rate of 1.66%. My fidelity starts their margin loans at 8% and goes down from there the more you borrow to as low as 3%. Its no risk for them to offer these loan rate as they could just sell the stocks to cover the loans; but how do you borrow money on a credit card with those interest rates?
 
NickH said:
I do about the same thing, but keep it on hand in cash. My assumption is that if all of my credit cards are compromised, then my bank account will be too.
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I used to think the same thing, but then I actually had a problem with someone stealing my bank account information and making several very large purchases. I noticed it in the morning, and by noon, the credit union had removed the false charged, replaced the money, canceled my debit card, given me a temporary ATM card, and ordered me a new debit card. I got the new debit card in about a week, and it was as if nothing happened. All I had to do was sign two pieces of paper and I was set. So now that I know how easy my credit union handles it when there are false charges, I don't worry about it and just keep the money in the account. Having a lot of actual cash sitting around is pretty risky if it's not necessary.

With the cash back or points offers on credit cards, everyone should be using them for the bulk of their spending. 1-5% cash back really adds up over the space of a year.
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Amen. With the exception of the few people who can't take credit cards like my housekeeper, everything else is paid with the cash back credit cards. It adds up very quickly. People are crazy not to use them. They're available even for people with iffy credit nowadays.
 
jtrain609 said:
I'm not losing money to inflation with having money in a savings account, I'm purchasing peace of mind so that when the company doesn't pay me properly, all of my bills will still get paid.
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That's why I keep a month's worth of expenses sitting in the account. What I'm talking about are the people who keep 6-12 months worth of cash sitting around, as people like Ramsey tell them to do.
 
ATN_Pilot said:
That's why I keep a month's worth of expenses sitting in the account. What I'm talking about are the people who keep 6-12 months worth of cash sitting around, as people like Ramsey tell them to do.
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Meh, I can even see 6 months.

But what are actual expenses if things have completely hit the fan? For me that's a mortgage payment and utility bill and likely a cell phone bill, assuming it's a true emergency fund, as in both my wife and I have lost our jobs at the same time.

That's somewhere between $8,000 and $10,000, which isn't really a lot of money when you start talking about possibly taking that in on a monthly basis (pre-tax).
 
I just thought of another bit of horrible advice that I've heard Ramsey provide. A large number of callers have had set-backs that have resulted in bad credit ratings. With this in mind, Ramsey still encourages folks to throw any cash they might have at their debt. Without the ability to borrow, Ramsey is destroying any safety net these folks might have in the form of cash or liquid assets.
 
b3181981 said:
How do these people do this? How does one transfer money off of a credit card without being charged the cash advance rate?
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People with high credit ratings (usually over 680) who have large credit lines frequently get special offers for cash advances. I usually get a new offer in the mail from all of my credit cards every 1-2 months for anything between 0%-6% interest cash advances for 12-24 months.

So let's say you've got a similar credit rating and $80k worth of credit. You take the special cash advance checks at 0% interest and cash them for $40k. You go and buy two $20k houses at auction, use another cash advance check to pay for the repairs at 0% interest, and then quickly flip or rent out the properties. If you flip the houses, you pay off the 0% loan almost immediately and pocket the profit. If you're renting them, you make sure to use your cash flow to pay off the balance before the higher interest kicks in, then all cash flow after that is profit.

Many, many people have used credit cards like this to make significant chunks of change. You just have to know your market so you're not one of the schmucks that buys at the top of the market and has too much inventory on hand that you were hoping to flip when the market has a correction.
 
ATN_Pilot said:
People with high credit ratings (usually over 680) who have large credit lines frequently get special offers for cash advances. I usually get a new offer in the mail from all of my credit cards every 1-2 months for anything between 0%-6% interest cash advances for 12-24 months.

So let's say you've got a similar credit rating and $80k worth of credit. You take the special cash advance checks at 0% interest and cash them for $40k. You go and buy two $20k houses at auction, use another cash advance check to pay for the repairs at 0% interest, and then quickly flip or rent out the properties. If you flip the houses, you pay off the 0% loan almost immediately and pocket the profit. If you're renting them, you make sure to use your cash flow to pay off the balance before the higher interest kicks in, then all cash flow after that is profit.

Many, many people have used credit cards like this to make significant chunks of change. You just have to know your market so you're not one of the schmucks that buys at the top of the market and has too much inventory on hand that you were hoping to flip when the market has a correction.
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$20k houses? You missing a zero? :)
 
jtrain609 said:
Meh, I can even see 6 months.
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I wouldn't be able to sleep at night. :) I'd have nightmares thinking of all of the lost compounding interest.

But what are actual expenses if things have completely hit the fan? For me that's a mortgage payment and utility bill and likely a cell phone bill, assuming it's a true emergency fund, as in both my wife and I have lost our jobs at the same time.
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I'm never worried about the lost job problem. I can liquidate some of my investments and have the money in 24 hours if need be. In the meantime while I'm waiting for that catastrophe that will probably never happen, my money is working for me.
 
I actually had a meeting with one of our investors last week, and he was debating whether he should buy a house he found on 2 acres with 1600 sq ft in modest shape and it was only going for $27k. He's so used to paying just $20k for so many bank owned houses that he had a hard time coughing up the extra $7k. :) Needless to say, we made sure that he understood that it was still a good investment.
 
ATN_Pilot said:
I actually had a meeting with one of our investors last week, and he was debating whether he should buy a house he found on 2 acres with 1600 sq ft in modest shape and it was only going for $27k. He's so used to paying just $20k for so many bank owned houses that he had a hard time coughing up the extra $7k. :) Needless to say, we made sure that he understood that it was still a good investment.
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The taxes can distort that a bit in these parts... Even if I owned my place outright, there is no way any rent would ever cover taxes and insurance...
 
drunkenbeagle said:
The taxes can distort that a bit in these parts... Even if I owned my place outright, there is no way any rent would ever cover taxes and insurance...
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Insurance alone is a killer in Florida. Taxes can be a problem even in some less desirable locales, like parts of Michigan. I've got a friend who owns a condo not far from the airport in Detroit. Pays $7,000/yr in taxes. He'd be lucky to get about $900/mo in rent. Horrible investment.
 
ATN_Pilot said:
People with high credit ratings (usually over 680) who have large credit lines frequently get special offers for cash advances. I usually get a new offer in the mail from all of my credit cards every 1-2 months for anything between 0%-6% interest cash advances for 12-24 months.

So let's say you've got a similar credit rating and $80k worth of credit. You take the special cash advance checks at 0% interest and cash them for $40k. You go and buy two $20k houses at auction, use another cash advance check to pay for the repairs at 0% interest, and then quickly flip or rent out the properties. If you flip the houses, you pay off the 0% loan almost immediately and pocket the profit. If you're renting them, you make sure to use your cash flow to pay off the balance before the higher interest kicks in, then all cash flow after that is profit.

Many, many people have used credit cards like this to make significant chunks of change. You just have to know your market so you're not one of the schmucks that buys at the top of the market and has too much inventory on hand that you were hoping to flip when the market has a correction.
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ohh I forgot about those types of checks. That's how i bought my C-150 in 2007. In 2006-2007 they were throwing money around like it was going out of style. I received an offer in the mail for jp morgan chase for a cash advance check at a fixed rate of 6% or a 6 month rate of .6% for six months than the normal 12% there after. I called them up and asked for my credit limit to be raised to 35k and without any verification of what I told them they just did it on the spot. I didn't realize that in this current economic climate, that it could still be done with the proper credit rating. I'll have to look into it. Thanks
 
ATN_Pilot said:
Insurance alone is a killer in Florida. Taxes can be a problem even in some less desirable locales, like parts of Michigan. I've got a friend who owns a condo not far from the airport in Detroit. Pays $7,000/yr in taxes. He'd be lucky to get about $900/mo in rent. Horrible investment.
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Renting my place would trigger about $20,000 in extra taxes/insurance for me. That said, was not the case when I bought the place. Congress can and will turn a great investment into a money pit overnight with the stroke of a pen.

There has been a lot of that lately, which is one reason a lot of wealth has stayed in cash, losing money to inflation...
 
ATN_Pilot said:
That's why I keep a month's worth of expenses sitting in the account. What I'm talking about are the people who keep 6-12 months worth of cash sitting around, as people like Ramsey tell them to do.
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Yeah...uh...going out on a limb here, but perhaps those who follow Ramsey are the same folks who lack additional skills beyond their "primary" source of income, and thus if they were to lose their "primary" source of income they will need the 6-12 months worth of liquid funds to utilize and sustain life. You know, cause they never diversified their professional skill set. Education, formal - legit education, is not necessarily a value to the folks who take financial guidance from a zealot.
 
ATN_Pilot said:
Insurance alone is a killer in Florida. Taxes can be a problem even in some less desirable locales, like parts of Michigan. I've got a friend who owns a condo not far from the airport in Detroit. Pays $7,000/yr in taxes. He'd be lucky to get about $900/mo in rent. Horrible investment.
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I think the most expensive real estate tax in Kentucky is 1.16% with most tax districts less than 1%.
 
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