The Best (And Worst) Reasons to Borrow from Your Retirement

Posted: 12 Sep 2011 04:00 AM PDT

One of the most tempting things to do when you are financially stuck is to borrow from your retirement fund. However, borrowing from your retirement plan can come with serious consequences, and might be a serious money mistake. You have to factor in the cost of lost opportunity (since that money isn’t working on your behalf anymore) on top of considerations that involve fees and interested associated with borrowing against your retirement fund. However, in some instances, it might make sense to borrow from your retirement account.

The Best Reasons to Borrow from Your Retirement Account

If you have truly exhausted other options, and your retirement account can pull you back from the brink of financial insolvency, you it might not be the end of the world to borrow from your retirement account. In some cases, if you have a great deal of credit card debt, it might make sense to borrow against your retirement account. This is because you will get a smaller interest rate, and you might be able to repay your obligation quicker with the smaller rate — and save money over paying a high interest rate.

True financial emergencies can sometimes be solved by borrowing from your retirement account. However, you need to make sure that you are really going to be solving a problem and getting back on your feet. If the retirement account loan only prolongs the inevitable, you’re better off leaving the money in there; in many cases, a large portion of your retirement account is protected in bankruptcy.

The Worst Reasons to Borrow from Your Retirement Account

As you might imagine, borrowing from your retirement account to fund things that aren’t necessities is a really bad idea. It’s also a bad idea to turn to your retirement account first. Just because you plan to “pay interest to yourself” is not a good reason to borrow from your retirement account. The fact that you want to go on vacation, buy a new boat, or get a big screen TV are not good reasons, either. Even borrowing for a wedding, or to pay taxes, may not be the best idea. There are usually payment plans you can use for big expenditures, and the government has payment plans that allow you to make installment payments without the need to dip into your retirement account. You should be trying to max out your retirement account, not withdraw more from it.

Paying Back Your Retirement Account Loan

If you do borrow from your retirement account, you need to make sure that you understand the terms. If you don’t repay your retirement account loan as specified, it turns into a withdrawal — and that comes with penalties and taxes. Those come on top of the loan fees you already paid when you originated the loan against your retirement account. It’s something to consider.

Also, if you change jobs, get fired/laid off, or quit while the loan is still outstanding, you might be required to repay the entire remaining balance all at once. That can cause it’s own problems.

Before you decide to borrow against your retirement account, organize your finances, weigh all the options, and consider the consequences. You may decide it’s not worth it.

How to Save Money on a Car

Posted: 12 Sep 2011 04:00 AM PDT

Shopping for a car can be tough since the dealer usually has all the advantages. Usually, the buyer feels like the deck is stacked against them. Sometimes you might be better off repairing your car before you go into debt to buy a new one. If the amount of repairs are out of the question, here are some tips on how to save money when purchasing a car.

Get Your Financing in Order

Although we all wish we could pay cash for cars, it is not always possible. Many people don’t realize that shopping around for financing can save you a great deal of money. The dealership is certainly not the only place where you can get new car financing. Shop around and know your credit score before you start. This way, there are no surprises when you are trying to get a low interest rate. Your APR will be determined by your credit score, so make sure your credit report is accurate before you shop.

Never Negotiate Based on Monthly Payment

Do not fall into the trap of negotiating your car price based on monthly payment. This will extend the length of your car loan. The dealers can get the monthly payment down to just about anything using this method, while hiding the fact that you are being overcharged for the car. Always negotiate based on the interest rate of the loan and the actual price of the car, without extras being stuffed into the deal without your permission.

Negotiate your Car Purchase

Shop around using internet sites for car prices that are considered fair for the make and model you are interested in buying. Once you have determined the price of the car that you are interested in buying, ask the dealer for the out-the-door cash price excluding rebates, incentives or trade-ins. The price should include all dealer-added fees. At the beginning of the negotiation, don’t let them use your trade-in or financing as part of the negotiation. Tell the dealer that you prefer to pay cash and that you have decided to sell your current vehicle on your own. You can change your mind about the trade-in and negotiate that part, as well as the financing later in the process.

Start shopping around at other dealerships for similar cars. Mention the price you were offered at the last dealership. Do this until you are satisfied with the price and quality of the vehicle you are interested in buying.

Beware of Fees

Finally, beware of any add-on charges or fees from the dealership. Also, look over your paperwork and make sure your trade-in price is correct. If you see a discrepancy or wish to question any ambiguous fees, tell them before you sign any paperwork associated with your purchase. Have them correct any discrepancies before you sign.

And there you have it. These tips should be very helpful to you when purchasing your car. Remember, never be afraid to shop around, and use the information to your advantage, which is the key to success in car negotiations.

Bio: John knows a lot about cars, and also financing because works for a car dealership. His company specializes in assisting people when they ask “How can I sell my car“?

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