Experiences Using a Non-Profit Debt Management Program

Calling a debt management program (DMP) was a low-point in my life. Newly divorced with more than $15,000 in credit card debt, I didn't trust anyone - not my ex-husband, not my credit card companies (who had come after me ruthlessly despite my very decent credit history), not my divorce attorney, not myself. I certainly didn't trust that the automated phone system at a debt management program called Consumer Credit Counseling Services (CCCS) would help me get out of this terrible financial situation.

But I had to try something! My creditors' calls wouldn't stop. The operators, I could tell, were getting ever more professional sounding, higher and higher up in collections at the banks I was dealing with. I had to find a way to restore order to my life - even if it was going to be a new order that I wasn't happy about having to live with.

Consumer Credit Counseling set up an appointment for me with one of their representatives, and I arrived at their satellite office near my home to find a friendly, polite, young man named Gerald waiting to discuss my findings with me. He was sympathetic. He listened as I described my situation. He said to me, "You can do this. You can get out of debt." He added something comforting like, "It happens to the best of us."

He explained to me the terms of "joining" CCCS: I had to divulge all my debts to them as well as tell them about my income and monthly expenses. Based on that information, they would negotiate with my creditors for lower interest rates and lower monthly payments. They would encourage my creditors to stop harassing me. Usually, Gerald said, it worked. I would stop getting harassing phone calls from creditors. This was the good part.

There were more terms, however. I would have to pay CCCS an initial fee, which I think was around $50. After that, I would have to pay them $24 a month for as long as I was on the program. They would need my checking account number because they would automatically withdraw my monthly payment (in my case it was $360 per month), then they would distribute it out to my creditors. Late payments or insufficient funds could mean getting dropped from the program.

And, perhaps most significantly, as long as I was on CCCS's program, I could not have a credit card or apply for a line of credit. Car loans were an exception.

I was hesitant to sign on. After all, I told myself, I didn't have a credit card problem - that problem had belonged to my ex-husband. My problem wasn't overspending, it was trusting the wrong man. The thing was, though, I was the primary card holder on our accounts, and I was therefore held legally responsible for the debt. I was the one who faced harassing phone calls daily. I was the one who, frankly, cared. I didn't want to go forward in life with a terrible credit record and debt up to my eyeballs. So, umm... I did have a credit card problem no matter what the source. And, I wanted my creditors' calls to finally, finally, stop.

I signed on.




With the help of the debt management program, Bank of America agreed to reduce an interest payment on a very high balance from 23% to 8%. HSBC reduced the interest on a card I had with them from 12% to 0%. And, Cox Communications, a cable/ phone company with whom I had an outstanding balance of $550, agreed to accept a monthly payment of just $20 as long as it came through the Debt Management Program. I had tried negotiating with all these creditors myself with no luck - the DMP did so easily and the harassing phone calls stopped.

I made my monthly payments. I never missed one, even though it was really hard sometimes. I lived without the convenience of a credit card for more than two years. While I was on the program, I also strove to make extra payments to my largest credit card balance (Bank of America), using the debt management program to keep me in good standing and generally on track, but exceeding their expectations by paying down the big debt.

(Gerald, by the way, told me I shouldn't have paid the extra money to the credit card balance, but used it to start a savings/ emergency fund - was this good advice or did he just want me to keep paying CCCS $20 a month? I'm not sure. I will say that every single person who I ever spoke to at CCCS, by phone or in person, treated me with kindness, compassion, and respect. I never heard a derogatory word or had the horrible experience of calling during business hours and being unable to reach a real person. Overall, I'm thankful to the company for their support.)

Finally, I was able to pay off almost all of the debt and a family member lent me the last few thousand so that I could go off the debt management program. I wanted to rejoin the world of credit - and reestablish myself as a good credit holder. I expected credit card offers to come pouring in to me. They haven't. I'm not sure if it's because I was on a debt management program or if it is because in the current economy banks simply aren't extending credit to new/ risky customers. I did finally procure a credit card, but it has a limit of just $500 and an annual fee of $39. (So... six months off the program and I'm $39 back in credit card debt, already... without even making a purchase.)

If you are considering a debt management program (DMP), here are some points to consider:

• It should be a not-for-profit organization and the monthly fee should not be above $40.


• You should be able to make extra payments to your credit card accounts at your convenience without going through the DMP.


• You should be able to go off the program at any time you choose, with no penalty from the DMP itself. (Your credit card companies may punish you - for example, when I went off the DMP, my one card with a remaining balance went from a 0% interest rate - negotiated by the DMP - to an interest rate above 30%.)


• You should be treated respectfully every time you call to speak to a representative at the DMP.


• They can only help you as much as you are willing to commit to helping yourself.

The Federal Trade Commission has also posted information for consumers about using Debt Management Programs effectively and about how to know if the program is legitimate. Link to that information here.

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Recession Worries: Bad for Teeth; Boon to Dentists

Six days ago, I woke to find pain in my jaw, on the right-hand side near the temple. The pain wasn't so severe that I couldn't work or think (yes, I've known that kind of mouth pain in the past), but it was annoying. I was worried about the cause. Could it be Tetanus (also known as lockjaw)? Or maybe I was grinding my teeth in my sleep? I'd never had a problem with nocturnal teeth grinding, but to me it seemed the most likely cause.

I decided to try my own fix. In bed, and close to dreamland, I got into the habit of extending my tongue so that it formed a barrier between my upper and lower gnashers. There was little change after a day, but two days later the pain was almost completely gone, and my tongue suffered no ill effects. Today I woke to find that my jaw was 100% back to normal.

I'm thankful that the pain has been eradicated, but now, once again, I'm worried about the cause. I'm 99% certain that it's this recession. I've been worried about my income, bills and responsibilities for some months now, and I think the anxiety is starting to take it's toll on my unconscious mind. Am I getting enough rest? I feel like I am, but I'd need to go to a sleep center to know for sure.

Then, earlier today, I listened to a great episode of my favorite NPR radio show This American Life. Today's show was called "Scenes From a Recession." The show begins with a segment about how this recession has been a boon to dentists. Nocturnal teeth grinding is up, resulting in chipped and worn out teeth. I was sorry to hear about the teeth, but it was nice to know that I'm not alone.

This recession episode also features a great piece detailing, in documentary form, the closing of a failed bank (if you're wondering which bank, it's this one.) Good stuff.

And that's not all: there's also a fascinating piece covering the final days of a Circuit City store, and it includes the kind of detailed coverage I've come to admire -- no love -- about This American Life (FYI: Circuit City no longer exists.) I found this particular story compelling, because I always thought the service at Circuit City was beyond terrible, and most of my friends didn't agreed with me.

If you missed it, the episode will be available (at the story link above) as a free MP3 download within a few days. Highly recommended.

Of course, if I'm wrong and it is Tetanus, I'll blog about it at this blog, from my hospital bed! But I think I'm OK. If the pain comes back I'll look into getting a teeth grinding guard later this week.

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The Guess The DJIA Contest: Prize = $10 Cash

The Dow Jones Industrial Average (DJIA) ended the week at 7,223.98, an improvement over the bear-market low of 6,626.94 of March 6^TH. Take your best guess at where you think the DJIA will be at the end of the first quarter and you can win $10. The person who comes closest to the correct figure wins a prize of $10 cash, paid via PayPal. Here's how to enter:

• Vote in our online debt poll (only takes a second.)
  
  
• Post a comment in the comment section below with a nickname of your choosing, your guess and add a sentence of two explaining why you think the DJIA is going where you think it's going.
  
  
• Click here to jump to our email form. Submit your real name, your nickname and your Paypal payment email address (need this info to pay you if you win.)
  
  
• The deadline for submitting your contest entry is Friday, March 27, 2009 @ 11:59pm Eastern Standard Time.
  
  
• This contest is open to residents of the United States only.
  

The winner will be the person who comes closest to the DJIA closing value for Tuesday, March 31, 2009. As long as you've never won a contest here at www.DebtHelp.tv, you can enter as many contests as you like, but you can submit only one entry per contest. Contest rules can be found here. Contest winners are not eligible to participate in any future contests. This contest becomes null and void if fewer than ten (10) entries are submitted.

We can at least have some fun as we sweat over our portfolios, right? Thanks for playing, and good luck to all.

Confirmed Entries for this (NOW CLOSED) Guess The DJIA Contest:

• Amie: 7,546.22
  

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No Reward for Prodigal Sons and Daughters

Under Water With Student Loan Debt

When I defaulted on my student loans back in the mid-90's, I was given the opportunity to make things right. William D. Ford agreed to purchase my student loan debt, and promised that if I didn't miss a payment for a year, they would remove all related derogatory items from my credit reports. I paid on time for a year, and they kept their promise. Having those negative items expunged from my reports was a huge deal for me, because my defaulted debt was holding me back financially.

Today, students who made similar mistakes with their student loan debt and who are now looking to rehabilitate their loans are hitting a brick wall. These students aren't able to get the negative marks on their credit reports removed because the current credit crisis has caused the market for student loan debt to dry up. Details of this issue can be found in this NextStudent.com press release. Here's a clip:

"...Before a defaulted borrower's student loan can be considered fully rehabilitated and the borrower's credit and loan status returned to good standing, the guarantor must resell the borrower's college loan to a new lender. But in the current credit freeze, no lenders are buying.

In November, the sole commercial bank still buying rehabilitated student loans announced it would no longer do so. Although a few non-bank entities may still purchase some of these college loans, 19 of the nation's 35 guarantors currently have no buyers for their student loans.

Each month, the Chronicle reports, $150 million in student loan debt is being added to the growing backlog of student loans awaiting rehabilitation.

Consumer advocates and guarantors are concerned that if something isn't done soon to help move these student loans out of default and restore borrower credit, borrowers may get tired of remaining in default and stop making payments on their student loans altogether -- which would lead to even more, snowballing defaults..."

But help is on the way. The Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF) program is now greasing the wheels of the credit markets by providing the funds necessary to revive the market for all kinds of debt, including student loan debt.

My prayer for the TALF: Godspeed.

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Filling Many Shoes: When Combining Part-time Jobs Is Your Best Option

My shoe rack tells you something about me. You'll find barn boots next to high heeled sandals. Teacher clogs beside black sneakers approved for restaurant work. Artsy looking knee high boots next to the slippers I wear when I write at home. Each pair of shoes represents a footwear requirement for a current or former place of employment. I fill many professional shoes - in the ten years since I graduated from college with a BA in English I've held at least fifteen part time jobs, often combining them to comprise a full time income. Working this way has come about partly by necessity (I was a grad student for a while) and partly by choice (as a working freelance writer, it is always easier to balance my jobs around my writing life than the other way around). For me, it has proven a (fairly) stable way to earn a living.

In this troubled economy, people are being forced to get creative about how to earn a living. I'd like to throw out the idea that combining part time incomes can be a great way to work and live. So, here is the truth of that working reality - the good and the bad, as well as some tips to make it work.


Advantages that I've found:

• Meeting interesting people and always finding new professional contacts and connections.


• Getting to try different career options, some of which may not be right for me in the long run, but were still interesting or beneficial. (For example, I worked at a retail pet shop during a time that I had a puppy - this saved me money and helped me support my animal. Another example: I will never forget the two years that I spent tutoring adults with literacy challenges. Meeting people who so longed to read and write, something I so take for granted, was humbling and life-altering.
  

• Personal freedom! I do know that my friend who is an accountant for a major financial firm makes a lot more money than I do and is successful in a material way that I'm not. I do get jealous of that sometimes. (Especially because she's one of the lucky ones who makes great money and also loves her job.) But I do get to walk my dog on a deserted beach on Thursday mornings... and Wednesday afternoons... and drink tea with my friend on Friday mornings... Basically, combining part-time jobs has left me with the freedom to arrange my schedule so that I have lots of time for my dog and some time for my creative writing projects.

• Staying young at heart. There is something about working in multiple professions that means I have to stay flexible and get along with people who are diverse in all kinds of ways. Variety keeps my brain agile.


• Part-time jobs can pay really well for less commitment than full time work. I'm thinking right now of people who gain $250 of income per week by delivering a daily newspaper. Yes, they have to wake up very early, but for approximately fifteen hours of work per week they are not doing too badly. Plus, I've been told by an acquaintance who delivers the paper that holiday tips from customers often total $1,000.


• An unexpected job security. I know that most of us assume in bad economic times, part-time employees would be the first to go. But consider the fact that employers don't have to pay us benefits, and often get more for less. It's in their best interest to keep us on during tough times. My jobs have not been affected by the economy thus far. Plus, if I lose one job, I'm not totally without income. I have the others to fall back on, and can often pick up more hours.
  
  
• 401K - I do actually get this from one of my part-time jobs, which is a nice benefit.


• Gym membership. Because one of my part-time jobs involves tutoring at a college, I can use the college facilities, like the gym and the library, for free.
  
  

Disadvantages that have come up over the years include the following:

• No health care benefits. I purchase these independently.


• A lack of job security. Okay, I'm contradicting myself, but sometimes part-time jobs are more easily cut, or they are temporary and end because, say, a federal education grant ends.


• Strange hours. Often, part-timers are covering shifts that full-timers don't want to cover. For example, I've worked Sunday afternoons for the past five years. This works for me, though I know for some people that's the worst shift imaginable.


• Employers who, naturally, don't know your whole schedule. My boss at one job might adjust my hours slightly, not thinking it's a big deal, but it may throw off my other job and cause me to have to do some major hustling, or shuffle the other schedule.

• Along the same lines, I sometimes feel like I'm being pulled in ten different directions.


• Lower income overall. I definitely have a sporadic income because, well, I work more at some points in the year than others. This is annoying! And it has required me to become better at saving/ planning. I also think that it results in a lower income overall than if I were working at a full time job that someone with an advanced degree would work at.


• No sick days! No snow days! No holidays! When the rest of the world is safe at home, celebrating time off, I'm often regretting lost income. For me, this might be the biggest disadvantage.
  
  

Okay, so let's recognize that right now people may be forced into this situation - working two or three part time jobs to make ends meet. How can you make it work for you?

• Find jobs that complement one another. For example, I teach writing courses that naturally have a lot of prep work. My (generous) bosses at my tutoring job allow me to grade papers if I have downtime between students. This makes these two jobs fit together perfectly, and allows me to give more hours to the tutoring center than I would otherwise be able to. Along the same line, if you have one job that requires lots of mental work, it can be good to have a second job that's more physical/ social. In this way, teaching has been complimented by waitressing for me in the past.


• Say yes to opportunity! Just try it. As long as it's a safe situation, you don't have much to lose. It's very easy to quit a part-time job if it turns out to be awful. (No, distributing free samples at the local deli was not a professional dream come true for me. It didn't kill me either.)


• Ask your employer to consider giving you benefits like health care or sick days. Many will consider it, especially if you're working more than 20 hours a week.

• Know where your funding comes from if you're working for a non-profit. Often non-profits pay part-time employees very well because they need to use grant money within a specified amount of time. However, employment after the end of the grant period can depend on the organization receiving the grant again. This is not necessarily bad, but it's nice to know ahead of time if "lack of funding" could become a reason for the position to end or change.


• Make yourself a part of the workplace culture, even if you are not there that much. This can be hard as lots of places get clique-y, but it's important to your job security. Participate in conversations, ask questions, make suggestions politely, look at and talk to your boss. Even when it's part time, you want and need to seem invested. Plus, it will be more fun.


• Commit to a schedule you can live with. I work very hard for four days, then have three days off. The long days are tough, but it works for me. Others might prefer six shorter days. Almost everyone needs at least one day off every week. Consider that when you commit.

• The old adage "do what you love" tends to work for people, even if it means taking a job that you're overqualified for in some ways... part-time work can be a great way to experiment with new career possibilities.


• Be honest with people. Let them know you're interested in full time work if you are. Also, let them know in the meantime that you're balancing more than one place of employment. I have always found my bosses to be understanding about this.
  

Okay, so if I've sold you on searching for part-time work, here are some suggestions (via YahooShine!) about the 7 best part-time jobs available. Happy searching! Be ready to expand your shoe rack!

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Teaching Kids About Finances

Parents face a lot of challenges these days. From first days of school, to first crushes, to when they turn 16 and get their driver's license -- we deal with it all, eventually. But, there are some things that need to be dealt with sooner rather than later. One lesson that kids need to learn while they are still young is how to manage money. Financial responsibility is a skill that will stay with your child for the rest of their life. I'm dealing with the same issue right now with my daughters, and here I'll share some of the things I've done, and offer insight into raising a financially disciplined child.

• Teach your child the difference between a "need" and a "want". Often, a youngster can't really distinguish between the two, especially if they are used to getting pretty much whatever they want. Here's what I did. I explained to my kids that things like rent, electricity, and car insurance were "needs", meaning we couldn't really get along without them. Things like the newest video game system, or a new cell phone (my 8-year-old wants a cell phone...it's NOT going to happen!) are "wants"....sure, they would be nice to have, but we can get by without them. If your child has a clear idea of the difference between "need" and "want", they will be more likely to spend their money on something that's more important to them, instead of wasting it.
  
  
• Encourage your kids to save a little, each time they earn some money. With my girls, I give them an allowance of a dollar a week, for every year of their age. I also made a rule that they have to save half, and spend half. Think about adding interest to what your children save up. That will show them that sometimes saving is better than spending right away, because they will have more money to spend in the long run. Older kids can figure for themselves how much extra they are earning by getting interest on their savings. This would also be a good time to teach kids the good and bad things about borrowing.
  
  
• Set limits on their spending. Don't allow them to just "blow" their money on anything they want. For example, if you're like me, and you have a child that runs outside with money in hand every time they hear the ice cream truck...you have to teach them that sometimes you can't have whatever you want, whenever you want it, and that they can get a lot more down the road if they just show some financial restraint. Kids model what they see, so set a great example by being financially sensible yourself. Just because that plasma TV is on sale, doesn't mean that you should run out and buy it!
  
  
• Take your kids, as soon as they are old enough, to your local bank or credit union and help them open their very own savings account. My grandparents did that for me when I turned ten. They started me out with a hundred dollars, and by the time I turned 18 I had almost five thousand dollars! That money came in really handy when it came time for me to strike out on my own.
  
  
• Here's something that helped me save money: When I wanted to buy something with part of my savings, (for example, I paid to go to summer camp when I was 13), my parents didn't really object. Being able to reward yourself occasionally is part of what makes saving worthwhile.
  
  
• You may also consider savings bonds, because they can be bought for half of the face value, and if your child uses the interest earned from the bond to help pay for college, it may be tax-deductible. Bonds also can't be spent right away, which will teach your child a lesson in delayed gratification.
  
  
• Let your kids make their own spending decisions (within reason of course). Whether they make a good choice, or a not-so-good one, they will learn from it. Teach them to weigh the pros and cons, and to do some research and compare different options before they make that purchase. If you use credit cards, take that chance to teach them how credit works. They should know how to protect themselves against credit card fraud, how to calculate a bill or a tip, and how to make sure they aren't getting overcharged.
  
  
• Treat your kids' school attendance as if it is a full time job (which in my opinion, it is). Many grown-ups get performance bonuses in their jobs, so why not do the same thing for the kids? Reward good grades, and reward them for improvement as well. That will motivate them to keep doing well in school. When they get old enough, encourage them to get a part-time job so that they can learn about taxes and Social Security withholding. (Plus, if your kids are anything like mine, they value their money more if they are the ones who have earned it).
  
  
• Nurture an entrepreneurial spirit within your child. Many kids earn their own money by walking their neighbor's dog, raking leaves, shoveling snow in the winter, or something similar. Or, if your kids are like mine and have way too much stuff, help them have a yard sale. They'll be de-cluttering their bedrooms, and earning (and hopefully saving) money, too!
  
  
• Level with them in an age appropriate manner. Kids can pick up on things from a very young age. They know when Mom and Dad are stressed out, and when they are old enough, you can start explaining when and if money gets tight around the house.
  
  In my opinion, kids detect lies, cover-ups and half-truths far more often than most parents realize, and this can lead to a child having problems with honesty later in life.
  
  
• Also, explain to your kids that they shouldn't just blindly buy into what they hear on TV and see on the internet. The American Academy of Pediatrics estimates that an American child sees over 40,000 commercials each year. That is a lot for a child to process. Explain to your kids that it may look great on TV or online, but just because "so and so" has a fancy car or all the latest gadgets, doesn't mean that they should live beyond their means.
  

I've used a lot of these tips within my own family, and I can honestly say that I think my advice is beginning to take root. Just the other day, I asked my daughter if she wanted to spend her allowance at Wal-Mart, in the toy aisle, and she said, "No...I'm saving up to buy a new bike". I was shocked, but I was really proud, too. If you employ some or all of the tactics I've written about here, I'm willing to bet that your child will soon surprise you with a nugget of financial wisdom as well.

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Paying Homeowners To Be Responsible

A few weeks ago, I wrote about how the Obama administration wants to let bankruptcy judges reduce both the interest rate and the principal (also known as a cramdown) for bankrupt homeowners who bit off more than they could chew. Now, the White House wants to pay homeowners for being good boys and girls by paying their bills. Here are a couple of clips from a WSJ article:

"...Loan-servicing companies will receive up to $3,500 from the government to participate, with the government also matching a portion of the lenders' costs, dollar-for-dollar. Homeowners will get as much as $5,000 apiece in federal money to reduce their outstanding balances, as a way to encourage them to stay current on the modified mortgages..."

"...Borrowers will have to sign affidavits attesting to their financial hardships. In return, they will see their interest rates drop to as low as 2%, their payment periods lengthened, and other modifications aimed at bringing their monthly payments to 31% of their income -- commonly considered a reasonable ratio. This program will be limited to first-lien mortgages with outstanding principal balances that don't exceed $729,750, in the case of single-family homes...."

I'm not a homeowner, but if I was, I would get a bit nauseous every time I read the above. As a renter, I still find it irksome. It's almost as though the smarts folks who are running the show have no understanding of the term "moral hazard."

But, then again, the housing situation is so bad that such measures may be necessary. After all, if all these struggling homeowners lose their homes, whole neighborhoods will decline, and when that happens, vacated homes will get trashed. Who is going to want to buy a home that's infested with rats, mice and roaches, and has had all the its copper plumbing stripped out? That's the reality of the American housing sector right now.

Exactly how many homeowners are underwater? Here's a clip from a Bloomberg article:

"...More than 8.3 million U.S. mortgage holders owed more on their loans in the fourth quarter than their property was worth as the recession cut home values by $2.4 trillion last year, First American CoreLogic said.

An additional 2.2 million borrowers will be underwater if home prices decline another 5 percent, First American, a Santa Ana, California-based seller of mortgage and economic data, said in a report today. Households with negative equity or near it account for a quarter of all mortgage holders..."

And here's the latest on delinquencies, from today's Mortgage Bankers Association press release:

"...The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 7.88 percent of all loans outstanding as of the end of the fourth quarter of 2008, up 89 basis points from the third quarter of 2008, and up 206 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The delinquency rate breaks the record set last quarter and the quarter-to-quarter jump is the also the largest. The records are based on MBA data dating back to 1972.

The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 3.30 percent, an increase of 33 basis points from the third quarter of 2008 and 126 basis points from one year ago. The combined percent of loans in foreclosure and at least one payment past due was 11.18 percent on a seasonally adjusted basis and 11.93 percent on a non-seasonally adjusted basis. Both of these numbers are the highest ever recorded in the MBA delinquency survey..."

Instead of borrowing and spending hundreds of billions of dollars with all kinds of convoluted government programs aimed at jump starting the economy, why not give every American household a prepaid credit card for $100,000. The idea seemed a bit crazy to me months ago, but it doesn't anymore. Bottom line:

• It would cost less than all the government plans being implemented.
  
  
• It would be fair, because every household would get an equal amount, including those who are already rich.
  
  
• It would get Americans spending again, no doubt. The housing sector would be back on track in no time.
  
  
• Corruption and wasteful spending wouldn't be an issue, since the money would go directly to the American people.
  

But what about inflation? Here's my plan:

• As a preemptive move, the Fed would raise short-term interest rates just before the Treasury Department issued the prepaid cards. All quantitative easing and cheap money programs would end immediately.
  
  
• Spending limit on each card would be set to around $5,000 per month with only one exception: consumers would be able to use more to make a down payment on a home, or to buy a home outright. Program would have a "use it or lose it" policy.
  

No spending on luxury items (luxury cars, boats, etc.) Eating out? OK. Investing in stocks? No problem. Want to buy new, energy saving appliances or install solar panels on the roof? Yes! Pay contractors to build you a new kitchen? Go right ahead! Use the cash to start a business? By all means! Want to send your problem child to a private boarding school? Start packing. Pay your taxes? Absolutely.

Let's take this idea to the American people with a referendum. Give voters the option of the above plan, or to continue with the administration's plans.

I'm a big fan of Barack Obama. I just don't like some of his administration's ideas related to fixing the housing problem.

As a final note, everyone should listen to the recent Bad Bank episode of the NPR radio program This American Life. It's really great (then again, this show is always great. I also highly recommend MarketPlace on NPR.) The Bad Bank episode contains a very compelling, private-sector solution to the housing mess. The program also explains why the banks aren't lending, despite having received billions in federal aid. Grab yourself a cup if coffee and enjoy.

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Refinancing Our Car Loan Worked for Us

With the way the economy is today, everyone seems to be looking for a way to cut their monthly expenses. Besides a home mortgage, or rent, a car payment is probably the single biggest expense that a person has to deal with. The Federal Reserve has cut interest rates nine times in the last ten months, and there may not be a better time to refinance that auto loan that came with a high monthly payment. My husband did just that, and ended up saving our family a little bit of money each month. Eighty or ninety dollars may not seem like much, but every little bit saved helps us in the long run.

He would have never needed a new truck if I hadn't totaled the van that he was using for work. However, I did wreck the vehicle, and the day after that, he went to our local Ford dealership and signed on the dotted line for a shiny new, silver Ford F150. The payment was $515 a month, which I thought was sort of steep- but I didn't really say a whole lot to my husband, because I figured that he knew what we could afford and what we couldn't. Besides, he was without a work vehicle, so he felt pressure to take the first loan offer he received. He made the payments for almost four months, but didn't seem to be paying down the balance too much. I looked at his monthly statement from Wells Fargo, the finance company that had given him the loan to purchase the truck, and I noticed that the interest rate was high. (29%- perhaps it was so high because of his tarnished credit?) That meant he was only putting a little over $300 a month toward the principal on the loan. I knew there had to be a better deal out there, and I encouraged him to look into getting his truck loan refinanced.

He's not into research, and comparing prices, so I did all the "legwork" for him. I made phone calls, and got quotes from several online sources. The best deal was from Capital One, and they offered to refinance his loan at an 18% interest rate. While there was no application fee, and the closing costs were waived, he had to pay a prepayment penalty of $1400, or 10% of the loan balance. Now, over $400 of his monthly $515 payment was going toward paying the balance owed on the truck. That saved us almost a hundred dollars a month!

Refinancing a car loan isn't as complicated as it sounds. With these simple tips, anyone can lower their monthly payment.

• Look over your loan carefully. Some lenders charge an early payment penalty, so read your agreement and make sure that you actually have the option to refinance.
  
  
• Understand the difference between used-car interest rates and new-car interest rates. Some lenders only extend financing offers to those who have taken out loans on new cars. It's important to do the research, so you don't end up paying more than you did to start with.
  
  
• When in doubt, consult a professional. Auto loan refinancing can have quite a few hidden costs, so make sure that it will really benefit you financially. Some lenders will offer a low, "teaser" interest rate, but then slap you with outrageous application fees. A professional can sit down with you and show you how to tell if you're getting a good deal.
  
  
• If you're almost done paying your current loan, you might want to reconsider refinancing. The average car loan goes for 3 to 5 years. Trying to refinance within the last one or two years of the loan would make the payment period longer, and most likely add a few thousand dollars in interest and other charges to the cost of the vehicle.
  
  
• Make sure your vehicle's information is accurate, so the lender can price the vehicle. If it is worth less than $8,000, you probably won't be able to refinance it. (That's also why it's not really advisable to seek a refinance on a loan that's almost paid off.)
  
  
• Call your current lien holder, and ask how much it would cost to pay the entire loan off.
  
  
• Check your credit, and make sure there are no errors on your report. Lenders will base your new interest rate on your credit history, score, and record of payments made.
  
  
• Make sure your insurance is up to date. You won't be able to get the refinanced loan if your insurance coverage is called into question.
  
  
• Make sure the lien was paid. The Department of Motor Vehicles will record any lien holder on a vehicle, both the original lender and the refinancing lender. When the new loan is given, the first lien holder is supposed to give notice that their lien has been paid off. Now isn't the time for clerical errors!

Some Auto Refinancing Scams to Watch For

Don't pay for a vehicle appraisal, either. Most cars lose value pretty quickly, so you wouldn't want a loan denied because the loan amount is more than the vehicle is worth. Stay away from any lender who tells you that you have to pay for an appraisal, or any other kind of up-front fee. While there are fees involved in changing the automobile's title to show the new lien holder, the loan application and ensuing credit check should always be free. Be especially wary of any lender who claims they can give you more than the balance on your loan. Look over the loan paperwork very carefully, and never sign a blank contract.

If you have unfavorable terms with your current car loan, refinancing is most likely a good idea. If you're able to refinance, cool! But don't squander the opportunity to get ahead. Pay a little more than the minimum each month, but less than what you were paying before you refinanced. Doing so will get the loan paid off sooner, and it will build car equity faster.

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