Replies to This Discussion

Permalink Reply by Rebekah on December 5, 2012 at 5:54pm

So you're looking at an income tax and insurance situation literally foreign to the Americans offering you advice here. It comes down to whether the mortgage approval algorithms take these quirks into account.

If you're routinely maxing your remaining credit line, as I said, lowering your debt:credit ratio should help you. Though if I were in your whole situation, not looking just at the hard finances, I'd talk to my employer about changing the cash flow situation for fuel. Not sure what the tax consequences would be, but a company credit card or company account with a gasoline chain might be in order.

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Permalink Reply by David F. on December 5, 2012 at 4:39pm

The question is if you can increase your credit without using it.  If your credit debt is less then 1/4-1/3 of your limit you are in the best position.  Else you might take the raise to create this effect.  If you can't handle not running up debt then do not do it.

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Permalink Reply by J Garten on December 5, 2012 at 4:47pm

I feel I'm good at handling credit I have one card and It only gets used for fuel for the truck or the very very rare online purchase rare as in 2-3 this year

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Permalink Reply by Johnzerd1 on December 5, 2012 at 7:37pm

Yes take the credit increase....... and pay off the truck asap.......  question how much do you have in savings?

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Permalink Reply by Rob on December 5, 2012 at 7:46pm

My question is that will increasing my potential debt lower my chances for getting a mortgage in the spring.

I'm not the credit agency, but generally speaking, yes. Your credit score is likely to go down not up.

I feel I'm good at handling credit I have one card and It only gets used for fuel for the truck or the very very rare online purchase rare as in 2-3 this year

That's great that you haven't abused it, now how about taking the next step and reduce your debt? Jack Bauer is right; you have too much debt. He is also right that you have taken on a great deal of risk for yourself. I understand that it's for a job but I bet there is another way to get the job done without all that risk and debt burden. It's there if you're open to it.

You get rich by collecting interest, Bud, not paying it. Some time when you are bored, read about the Parsis of India. They're Zoroastrians whose ancestors arrived from Persia when the Shah agreed to convert the country to Islam in hopes of stopping Arab invasions (apparently that didn't work...). They refused to convert and fled to India.

The local Maharajah met with their emissary. He asked "Why should I let you stay? My kingdom is already too crowded".

The Zoroastrian representative sent for some cream and some sugar, set down a chalice before the Maharajah, and poured it full of cream to the very brim.

Then he invited the Maharajah to pour the sugar into the chalice, and to notice that the cup did not overflow (because the sugar went into solution, for all you chemistry fans...). He then invited the Maharajah to drink the cream, which he did. He asked him how it tasted.

"Sweet".

"And so it will be when you allow us to settle here. You will hardly notice us added to your subjects, but we will sweeten your cream".

He was impressed, and let them stay. Their descendents are among the richest people in the world. They own a lot of the big-name industries in India.

That's because their founder, Zarathustra (as in "Also sprach Zarathustra"--the guy staggering out of his cave into the rising sun...), told them not to pay interest, because he realized that interest payments keep people poor. But he never told them not to COLLECT interest. They are capital accumulators and venture capitalists. They fund much of the industry in India--and also Iran where the cousins they left behind still live. They are careful with money and invest it prudently.

"Ready money is the king's command" (old saying).

Don't borrow. Save, and invest wisely. Then you won't have to borrow. Great prosperity to you.

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Permalink Reply by Rebekah on December 5, 2012 at 7:59pm

I see the debt. I don't see the risk. The truck is insured at better than replacement price. Some sort of unemployment insurance takes over the payments if he becomes unemployed, and his employer takes over payments if he becomes underemployed. I bet he's well insured, formally or informally, against theft, too. The only vulnerability I see is quasi-voluntary unemployment, like resigning voluntarily to care for a sick family member.

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Permalink Reply by Rob on December 5, 2012 at 10:39pm

J, Rebekah says

I don't see the risk

but that is not what a certified financial planner would tell you without first sitting you down and have you fill out rather a lot of personal and financial information, before deciding that there is no risk.

It's good to hear that the company is in great shape and you're in good standing with the owners. It's great when you can do business with a handshake and a smile, and that's certainly my own modus operendi.

That said, you owe yourself some "due diligence" to get all the contingencies taken care of. For example, what happens if you become disabled? For starters your employment would be terminated. What are the terms of your disability insurance? Disability insurance is one of the most overlooked factors in financial planning. Usually there is a waiting period before receiving benefits, and that's mostly a good thing because that's what makes it affordable. But it can turn into a problem if you start missing payments between a disabling injury and when the benefits begin.
Unknowns and unresolved contingencies are a risk in themselves.

What do you think?

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Permalink Reply by Rebekah on December 6, 2012 at 1:17pm

I think it's really hard for Americans to wrap their head around a system of universal healthcare and unemployment benefits that guarantee car payments are made.

If OP can't work, he doesn't need the truck. It sounds like Canada's disability/unemployment program would provide enough to make up for OP's being underwater on it.

Financial planning is really different for people in a system with a tighter government-managed safety net.

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Permalink Reply by Will on December 5, 2012 at 11:21pm

Many here will tell you you should avoid debt, instead saving and paying for things in cash.  Which means you have to rack up US$100K-$200K to buy a house, all the while paying rent.  It isn't cost-effective.

Still:  $47K on a truck?  You have a *lot* of debt.  My main goal would be to get out from under that mountain, before buying a house.

I don't know if credit agencies consider what your debt limit is on cards.  I do know they consider your balance, and whether you pay it off every month on time.

When buying a house, you shd have 1/5 of the cost as a down payment, to avoid paying the mortgager default insurance.  (US, anyway.)

I take whatever credit limit my credit card company wants to give me, and just pay it off every month.  I have excellent credit.  FWIW.

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Permalink Reply by Jack Bauer on December 5, 2012 at 11:29pm

Lots of Ramsey followers around here.  Most would probably say no debt except for a mortgage.  15-year fixed.  You'd have to rent in the meantime anyway.  Payments are payments.

JB

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Permalink Reply by Rebekah on December 6, 2012 at 1:22pm

Payments are payments. Bah. It's called the mortgage interest deduction.

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Permalink Reply by J Garten on December 6, 2012 at 9:52am

Thanks everyone there is a lot of great advice here there are reasons why I wish to purchase a house sooner rather than later I know that paying down my truck before hand is preferable my plan is to use my tax returns yearly to pay it down because the whole thing is a tax write off I should get back around 10 000-15 000 back every year this I plan to put towards paying off the truck.

I try to maintain between 3000-7000 dollars in savings depending on how busy I am given the month.

The reasons I want to purchase a home sooner rather than later is because right now I pay 1600 a month for rent while that includes utilities its a basement suite (that's about average for where I live) where as if I purchase a home I can lock in at a 5 year rate for about 2.9% and for a 300k house pay about 1200 a month for a full house which while costing me in interest will free up more income for paying down the truck further the next reason is because the city that I live in is in a huge boom right now prices are going to be going up and there is already a housing shortage, between the oil industry booming and a new hydro electric dam being built estimates say that within 3-5 years you will not be able to buy or rent a home you will have to purchase land and build.

I do have a girlfriend soon to be fiance (if all goes well) haha who is not working at the moment this is do to her recovering from some medical issues she had this year. She finished schooling in the spring to be a vet assistant she has a job waiting for her when she is able to start working which will bring in approx 3300 a month before tax to start.

I do have very very good insurance 80% dental coverage full medical coverage if I become disabled and cannot work they will cover about 70% of my yearly income and if I kick the bucket I have 250 000 life insurance and 750 000 if I die on the job

I try to spend a lot of time thinking about the future and make plans for all the possible outcomes in life even if this company folds up I have a position on reserve at another company for about the same income as this one

sorry about the long post I hope this answers every ones questions

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