Financial Advice

I recently got hired at a marketing company. My pay has significantly increased to atleast 500-1000 a week, (I know it's not much, but for a 19 year old its decent) I have some immediate bills to pay, one being school which is about $1600 and the rest are tickets from motor vehicle violations ($800) and some other stuff probably equaling to around 1000 all together. Along with that, I've been getting sick of how unreliable my E34 540i is and I want to move onto a BMW that is somewhat more reliable and new(er).

So, my plan of attack is to get a loan. I have never applied for one and I have never had a credit card before. If I could, I would get a loan for about $15000 so I can pay all of my fee's off and buy a car with some money left over. Can anyone give me any tips or advice? Sorta alone in the dark here.

Thanks.

The main problem with a loan will probably be your lack of collateral and credit history. If someone (parent?) would co-sign, the odds of a loaner are higher and you'll get a much better interest rate. In the old days, I'd have suggested a small loan to pay off the small stuff and build a credit history. Pay it off as quick as possible, and then getting an auto loan will be much easier as you'll have a little credit history. Also, now would be the time to get a credit card, but be very careful in how you use it. Your goal needs to be to build a credit history, not get in debt.

It is very dangerous to buy big things soon after a pay increase. People end up 'feeling' more wealthy than they really are and then over spend. I would suggest you live on your new income and infuse an aggressive savings plan to purchase another car. Build in savings for your current car's unreliability and for those times when you may not have this- or any- income stream. Enroll in a 401k if they have them or start a ROTH. 19 is early to think about this, but if I had thought of it then and stuck to it, I could retire in less than 8 years rather than 18 more. Think about it. That's 1/2 your life vs your entire life for me to save to retire. Wow.

If you are disciplined and aggressive, you'll have $12-$15k in 18 months or 2 years. The car you want today will only decrease in price by then- helping you better afford the one you find or helping you find a better one with fewer miles or better options.

If your goal is to increase your credit rating, don't do it with an auto loan. They base your interest rate on your credit rating, and you'll end up getting screwed. That $15k loan will cost you $20k and you'll have a car worth only $7k at the end of it. There's $13k you threw down the toilet while your car depreciated instead of just $8k or so in normal depreciation. All for what? So you could have a different car right now rather than use the one you have?

This is not as fun in the short term, and not likely one that most people will use until they look at things like cars, TV's and furniture as just stuff that brings momentary pleasure not happiness. Fiscal happiness (for me) comes from lack of stress, ease of financial position, and a defined plan in case of uncertainty. A car loan provides none of those things.

With that debt that you have left to pay off wouldn't it be better to pay off all of that then worry about another car? You don't sound too financially well off and it sounds like you should have bigger priorities than a new car to me. Do you really need a BMW too? You could probably get a different brand just as nice and save you some major cash. In the end it's all your decision though, good luck.

This is all pointless to discuss anyway. You won't get an unsecured 15k loan at that age with limited credit history, just won't happen. You should be able to get a car loan but it will be exclusively for the car. They'll hold title and they won't give you extra. And yeah, the rate will be brutal.

Get yourself a credit card and put NO MORE than 30% of the limit on it, and pay it down to a low amount each month (but not all the way, leave a hundred bucks on it or so so that it shows as used). That will build your credit.

Sent from my Galaxy Tab using BimmerApp

Costa

As a 18 year old, I took out a similar loan in a similar situation. I ended up with two payments, one for the car, the other for repairing the car every couple months. It dragged on for a few years and I ended up taking a loss on it. My advice to you would be if you can't buy or lease a vehicle that's new or very close to new.....do not take out a loan. The best thing you can do is save up to buy a decent car cash, or use the money as a down payment on a much newer car.

Originally Posted by E36 Phantom

Get yourself a credit card and put NO MORE than 30% of the limit on it, and pay it down to a low amount each month (but not all the way, leave a hundred bucks on it or so so that it shows as used). That will build your credit.

NO! Don't leave a balance at all! You do not have to have a balance to build credit. This will *only* cost you extra money. They will assess interest on ALL the credit card purchases, not only the balance, so you will pay a LOT of money for NO BENEFIT.

The key to a good credit score is low debt and on-time pay. You do NOT have to carry a balance. People think that the cards won't report balances if none is carried, but they will report average daily balance- just as they would figure the $-sucking interest.

Think of it. If you leave just $100 on $1000 of purchases, paying the $900, you're STILL on the hook for the interest on that $900. Leave another (even $50) on the card the *current* month, and they STILL get you for that previous month's purchases AND the current month's. Paying off the balance RESETS this function back to ZERO preventing you from getting 'taxed' in painful interest. Bring in minimum payments of $25 or $50, and carrying a balance costs you that much more $.

No credit score improvement is worth $50 or $100 a month especially if you're trying to save $. Would you pay $50 more for that meal? $100 more for that TV? Well, that's what you're doing by leaving a balance.

From money.msn.com:

You don't have to pay credit card interest to achieve great scores. "Using credit" is not the same as "carrying a balance on your credit cards." Carrying a balance is expensive, bad for your finances and completely unnecessary. Many of us who have achieved 800-plus scores pay off our balances religiously, and we know you can build and keep great credit scores without ever paying a dime of credit card interest.

Originally Posted by Costa

I recently got hired at a marketing company. My pay has significantly increased to atleast 500-1000 a week, (I know it's not much, but for a 19 year old its decent) I have some immediate bills to pay, one being school which is about $1600 and the rest are tickets from motor vehicle violations ($800) and some other stuff probably equaling to around 1000 all together. Along with that, I've been getting sick of how unreliable my E34 540i is and I want to move onto a BMW that is somewhat more reliable and new(er).

So, my plan of attack is to get a loan. I have never applied for one and I have never had a credit card before. If I could, I would get a loan for about $15000 so I can pay all of my fee's off and buy a car with some money left over. Can anyone give me any tips or advice? Sorta alone in the dark here.

Thanks.

Terrible idea. You should pay-off your bills, build some savings and get some tenure under your built before taking on a big loan or upgrading to a better BMW. At 19 I was driving a Chevy Citation with 3 on the floor. $200, plus a pair of Bonjovi tickets was the price for that bad boy.

• Focus on paying off all existing loans
• Don't borrow anymore money until you are financially "secured"
• Focus now on making more money and becoming more successful

If you want to know if you can really aford some level of payments, say $500 a month for car costs, put aside $600 a month, after taxes, for a good number of months, say ten or twelve. If you did not invade that stash, and were truly able to lead your nurmal life, then you can afford it. If you found thatyou were putting off normal, but not regular expenses, like cloths, dates, gifts, etc., then you really cannot swing that level of payments.

Originally Posted by PropellerHead

NO! Don't leave a balance at all! You do not have to have a balance to build credit. This will *only* cost you extra money. They will assess interest on ALL the credit card purchases, not only the balance, so you will pay a LOT of money for NO BENEFIT.

The key to a good credit score is low debt and on-time pay. You do NOT have to carry a balance. People think that the cards won't report balances if none is carried, but they will report average daily balance- just as they would figure the $-sucking interest.

Think of it. If you leave just $100 on $1000 of purchases, paying the $900, you're STILL on the hook for the interest on that $900. Leave another (even $50) on the card the *current* month, and they STILL get you for that previous month's purchases AND the current month's. Paying off the balance RESETS this function back to ZERO preventing you from getting 'taxed' in painful interest. Bring in minimum payments of $25 or $50, and carrying a balance costs you that much more $.

No credit score improvement is worth $50 or $100 a month especially if you're trying to save $. Would you pay $50 more for that meal? $100 more for that TV? Well, that's what you're doing by leaving a balance.

From money.msn.com:

You are only charged interest on the balance that is not payed off by the grace period, usually 20 days. If you charge $1000 and pay of $990 by the grace period end date then you will only be charged interest on the remaining $10....

It is not necessary to carry a balance, the most important things are paying on time, longevity, use of credit vs limit etc...

Originally Posted by Emilner

You are only charged interest on the balance that is not payed off by the grace period, usually 20 days. If you charge $1000 and pay of $990 by the grace period end date then you will only be charged interest on the remaining $10....

It is not necessary to carry a balance, the most important things are paying on time, longevity, use of credit vs limit etc...

If you start the cycle with no balance, interest does not accrue at the point of purchase, and, if you pay off the entire bill, and start the next cycle with no balance, interest will not accrue. So, if you pay your bill in full each month, you will pay zero interest for the year.

If you have ANY balance at the beginning of the cycle, interest accrues for each purchase upon posting, so you will pay interest all year long on your average daily balance if you carry over a balance each month.

Pay off your credit cards in their entirety each month.

Originally Posted by Kamdog

Pay off your credit cards in their entirety each month.

+1

All of the other stuff really depends on your cardmember agreement. It can (and does) vary from card to card. Here is a snip from a popular card that does not offer a grace period as described above on new purchases

Paying Interest: We begin to impose interest charges on a transaction, fee or interest charge from the day we add it to the daily balance. We continue to impose interest charges until you pay the total amount you owe us. You can avoid paying interest on Purchases as described below. However, you cannot avoid paying interest on Balance Transfers or Cash Advances.
How to Avoid Paying Interest on Purchases ("Grace Period")
If you paid the New Balance on your previous billing statement by the Payment Due Date shown on that billing statement, we will not impose interest charges on new Purchases, or any portion of a new Purchase, paid by the Payment Due Date on your current billing statement. New Purchases are Purchases that first appear on the current billing statement.
How We Apply Payments May Impact Your Grace Period
If you do not pay your New Balance in full each month, then, depending on the balance to which we apply your payment, you may not get a grace period on new Purchases.

Originally Posted by PropellerHead

It is very dangerous to buy big things soon after a pay increase. People end up 'feeling' more wealthy than they really are and then over spend. I would suggest you live on your new income and infuse an aggressive savings plan to purchase another car.

This is fantastic advice and I hope you follow it. Part of being an adult is being fiscally responsible and foregoing purchases until you can safely afford them. Hang in there, put a little away every paycheck, and that new ride will be yours in no time!

Originally Posted by Costa

I recently got hired at a marketing company. My pay has significantly increased to atleast 500-1000 a week, (I know it's not much, but for a 19 year old its decent) I have some immediate bills to pay, one being school which is about $1600 and the rest are tickets from motor vehicle violations ($800) and some other stuff probably equaling to around 1000 all together. Along with that, I've been getting sick of how unreliable my E34 540i is and I want to move onto a BMW that is somewhat more reliable and new(er).

So, my plan of attack is to get a loan. I have never applied for one and I have never had a credit card before. If I could, I would get a loan for about $15000 so I can pay all of my fee's off and buy a car with some money left over. Can anyone give me any tips or advice? Sorta alone in the dark here.

Thanks.

Your location says you are from Vancouver, Canada.

read The Wealthy Barber (the original, after you can read sequel The Wealthy Barber Returns). It's by a Canadian and has more of a "Canadian perspective" on some things.

Pay your debt first and foremost. Save about $10k, then treat yourself to a nice gently used bmw with a smaller loan.

I am 26 and debt free(other then mortgage) while owning my own house and recently married. Life is good.

Originally Posted by BlaZinMJ3

Pay your debt first and foremost. Save about $10k, then treat yourself to a nice gently used bmw with a smaller loan.

I am 26 and debt free(other then mortgage) while owning my own house and recently married. Life is good.

Mazal Tov. I knew you were going to get married. I didn't see you posting about it actually happening. Good luck to you two and your future family.

The very first order of business should be to ditch the 540 while it's still running. I could not think of a more costly vehicle to own & maintain short of a 7-series or M. That's a car for an enthusiast with deeeeep pockets. Then get a good, reliable vehicle (not another BMW) that easily fits your salary (again.. not a BMW).

Ah, youth. Been there, done that. I came very close to declaring bankruptcy when I was 25 or so, because I got into debt up to my eyeballs. If I had a do-over for that, I would have gotten an old used truck instead of the brand new one, told the ex "no" to new furniture and bought stuff at garage sales for 1/10th the price, and paid off all my bills a lot sooner.

As it is, I divorced the spendthrift woman and economized. It took me 6 painful years to get completely out of debt. Since then, the only debt I've carried was a mortgage.

Debt sucks - except mortgage debt (because it's tax deductable and lower than the dividend rates for stocks these days, so honestly, everyone should be taking their money out in fixed 30 mortgages at 3.125% - discount that based on your tax rate - and buying AT&T stock, which is paying 5.2% dividends... taxed at the lower dividend rate if they keep that in the tax laws)

Unsecured debt is like a boat anchor on your future. Avoid it at all costs!!!