Pay Dirt is Slate’s money advice column. Have a question? Send it to Athena and Elizabeth here. (It’s anonymous!)
Dear Pay Dirt,
Several years ago, I bought a used car from a well-recommended dealership. It was the make and model I was looking for, 13 years old but with less than 40K miles and clearly beloved by the rich old lady who previously owned it. Even with the age I thought I was getting a great deal at the sticker price, compared to the other cars in my price range with 180K-plus miles.
Then the sales team got ahold of me. Somehow, after hours and hours of manipulation and pressure and being rushed through unexplained paperwork, I left owing an extra 80 percent on top of what I’d expected. I know, I know, I shouldn’t have let myself be fleeced. But they literally tacked on so many extras that they had to later take some things off that they legally couldn’t sell me on a car that age. Not to mention a god-awful interest rate despite my great credit score.
It’s a great vehicle that should last me ages, but now that I’m (slightly) older and (very slightly) wiser I find myself angry, resentful, and ashamed every month as I stretch my budget to make the payments. I can’t afford to pay it off any faster, but I feel sick when I think of how much longer I’m going to labor under the loan on a car that’s worth half of what I STILL owe on it. I can’t refinance due to the age. Is there anything I can do at this point?
—Maybe This Is Just a Lesson
Dear Maybe Just a Lesson,
This was such a shitty car-buying experience and I am sad for you. You should feel awesome when you leave with a brand-new (or new-to-you) car off the lot. This wasn’t the case, and I’m sorry.
You do have a few limited options on what you can do with the interest rate on the loan, at least, even if some of the money you paid when you bought the car is gone forever. Erin Papworth, money coach and founder of Nav.it, suggests, “If you’re having trouble making larger payments, consider refinancing the loan with a community bank for better terms. This is a great option for people who had to agree to a loan with less than ideal APR due to low or no credit.” Since you may not be able to change the terms of the car loan itself, you might still take Papworth’s advice and look into a personal loan from a community bank.
Community banks are banks that serve a smaller region so that they may focus on their customers who live in the area they serve. Since they are locally owned and operated, they have different criteria for personal loans than big banks do. They also usually have more products for those with lower incomes and lower credit scores, who typically are not prime candidates for loans offered by big banks. You can use the Independent Community Bankers of America locator tool as a starting point to look for a community bank close to you.
Dear Pay Dirt,
I am 27 years old and looking to pay off as much debt as I can before looking to purchase a home, but there are some obstacles in the way. My parents never gave me sound financial advice when I was younger, and I have been financially independent since 18, which has led to debt accumulation I could have avoided. I now have an amazing job where I make $1,600 biweekly after taxes, which I can use to comfortably pay the minimum amounts on my debt because of low living expenses.
I have heard about the debt avalanche and debt snowball methods, but I believe my situation is a little unique! I have $1,500 on a credit card with a 19.99 percent interest rate, $12,500 on a credit card with a 5 percent interest rate (I was lucky to have a low interest rate, but it made me irresponsible with spending on the card). I also have a personal loan balance of $9,000 (principal amount plus the interest), with an excruciating interest rate of 38 percent, that I regretfully had to take in an emergency situation. I also have $5,000 in student loan debt, with a very low interest rate of 5 percent. (It might help to note that I live in Canada.)
I definitely want to consolidate the personal loan to my own financial institution with a much lower rate. However, I don’t want to mess up my credit score with an inquiry in the case I am declined because of my debt ratio. I applied for a consolidation loan three years ago when my income was half of what I make now, and at that time a co-signer was suggested as well as consolidating all of my debt, but it didn’t make sense when some interest rates would be lower than the loan rate quoted around 9 percent.
My question is, how can I be in the best position to get approved for the consolidation loan and possibly pay down some other debt before applying? I would like to keep both credit cards and know that I can be responsible with them while paying off the balances. I just need this personal loan consolidated to a lower interest rate.
—Thanks So Much for Any Help
Dear Any Help,
Wow, that is a lot going on, and I could see why a consolidation loan would be of interest to you. You have what seems like it could be a lot of debt and it’s all over the place. Since institutions offering consolidation loans in Canada mainly look at your credit score and assets for collateral, it makes sense why you would want to clean this up before you inquire.
The debt snowball method would have you start paying your lowest amount of debt first, which would be the credit card you have a $1,500 balance on, for which you are being charged a 19.99 percent interest rate. After that, you would pay off your student loan, personal loan, and then the other credit card. The debt avalanche method has you paying off your highest interest rate loan of $9,000 first—your personal loan at 38 percent. So both of your high interest rates could be taken care of no matter which way you start.
If I were you, I’d go after my $1,500 credit card balance first, then work on my personal loan. Many people would say to do it the other way, which makes sense since you’ll pay the least amount of interest that way, but I’m a firm believer that money is emotional, and you’re going to need the smaller win first so you don’t get defeated on your way. Once the smaller debt is taken care of, apply that payment amount to your personal loan. The extra money will start to make a difference quickly, and then you can work on paying that off sooner.
I think you will find that once you have a more organized debt-repayment strategy, such as the one listed above, you will not need a consolidation loan. In the end, going for one of these is just taking out more debt, to cover the debt you have. Try to organize yourself first before you jump into another contract. Good luck.
Dear Pay Dirt,
I bought my first house seven years ago all by myself, and last year I got married and wanted to add my husband to the house, so we refinanced, and he was more than happy to let me put my name first for everything. All documents in the closing package had my name first, and even the loan closing docs said that the names on the title would appear as mine and then my husband’s.
Every document … except the actual title page. The document that mattered. As we were at the table signing these documents, we’re just being asked to review our names/spelling, and this slipped through. When we realized this, afterward, I first reached out to the county and they said it was a simple deed correction from the title company, but when I asked the company for a correction, I was told I signed this and it didn’t matter that it had been prepared improperly and that if I wanted to change it, I could pay the $450.
I kept being told that this didn’t matter because we were both owners. But it did matter, it mattered to me! I wanted my name first on the title because I bought that home on my own and I added my husband’s name to the title, not the reverse. It mattered that, despite the 100-plus pages showing my name first on the closing docs, when it mattered someone still assumed the husband went first. I get that we signed it, but it was one document buried in hundreds and it was the one document prepared incorrectly and it was the one document that mattered. Do I have options here?
—Can’t Stop Thinking About the One Page
Dear Can’t Stop Thinking,
This sounds like a frustrating situation. You worked hard to purchase your own home, had to think about letting your new husband refinance the home with you, and then had to add him to all the paperwork to make it official, only for the document that really counts to be wrong. I get how most wouldn’t be upset or understand why you are, but I do and would be in my feelings about it too.
Unfortunately, the best course of action is for you to pay the fee, according to loan signing agent Markia Brown from the Money Plug. “As a loan signing agent, I am trained to verify the names, amounts, and dates on all of the documents when conducting a signing,” Brown notes. In the course of that training, Brown was taught to double-check the title, “because of the process that the client has to go through to make changes in the event something is incorrect after the fact. The notary’s signature and stamp on each document represent that all of the documents were checked and verified by the homeowner prior to being signed. This puts the blame on the homeowner, in the event one of the documents was signed and then found to be incorrect.”
Mistakes happen, and it’s unfortunate that this one did. It’s important to remember that this slip-up did not undo all of your hard work in becoming a homeowner on your own. But if you can’t stop thinking about the page, maybe you should pay to have it changed. $450 isn’t chump change, but the sooner you can part with it, the sooner this will be all behind you. Be nice to yourself and go for it.
Dear Pay Dirt,
I don’t have a money problem so much as I have money anxiety and a money hope. I’m a 19-year-old college student who does the whole summer job/two side gigs shuffle. Currently, my tuition, rent, and 75 percent of food is covered for me, and my expenses include non-life-or-death necessities like textbooks, thrifted clothes, hairbrushes and soap, and food from the grocery aisle of CVS. I have about $1,300 currently, and that’s the amount that I always have just sitting in there. When I work over the summer, I’ve been able to get it up to $2,000 to $3,000, and I watch the numbers go down by about $500 each semester. My side gigs are lovely but unreliable, and a lot of COVID socializing has meant getting too much food and coffee with other people, because there’s not another activity we can always do.
In a few months, I’ll start covering all of my food expenses and bills except rent. First of all, I need to budget, but I do not understand … how. I tried cutting down on weekly coffee and eating out, but it turns out I had my reasons for those expenses, and it didn’t work and I gave up. I’m also not a frivolous shopper or sushi eater, so I don’t *get it*. I end up hating spending money on anything and panicking/feeling guilty about spending on what I need. (When I lost my hairbrush, I spent $11 on one my hair could not possibly use because the one I wanted/required was $15, and then I just wasted $11.) You guys always recommend one of those apps where you upload your actual expenses and it makes you little graphs; I’m a little scared about privacy and safety. Should I be?
Secondly, I feel like I need an actual emergency fund. Like, $1,000 in a high-yield, no-risk place. The goodwill of the person covering my rent is a little unstable, and I’m legitimately concerned that one month they might just silently keep their money, or juke me out and pretend they won’t send the rent up until the last moment before it’s due. I always have the $1,300 just sitting there. But I don’t want to wind up with just $32 in my accessible savings account! Maybe I should keep all my current savings in my savings account, but put lots of new money into a different account??
I don’t understand anything about money or banks, and I’m scared of making the wrong move. But if I do nothing, I might be crying over buying groceries next year. Meanwhile, my friend just started her retirement fund? I don’t have a credit card.
—I Feel So Behind
Dear Behind,
I was just like you when I was in college. I was constantly holding my breath, waiting for the other shoe to drop. That was no way to live, which is why I started budgeting—which, in retrospect, was the beginning of my personal finance journey. Budgeting and money can be overwhelming, but simply writing to us today showed you’re ready for a change and want to get started. Budgeting can definitely seem restrictive, and it’s hard telling yourself no, which I get, 100 percent. But as restrictive as a budget can be, it can also be a road map that tells yourself you’re ready for a new life.
First, you don’t have to be scared of putting your information into an app, as they are pretty safe from cybercriminals. Mint is especially safe, and this is the one budgeting app for beginners that I recommend, as it’s the least overwhelming. When entering your budget categories, don’t feel that you can’t earmark money for eating out or socializing. A common misconception about budgeting is that you aren’t to allow for anything fun, like having friends—but that would be counterproductive!
I’d also recommend you add a miscellaneous category to your budget. Things happen, like the incident with your hairbrush, that can throw a wrench into the best of plans, so it’s better just to assume shit like that is gonna happen and plan for it. Your miscellaneous category doesn’t need to be huge, but even setting $25 a month aside for this stuff will help you feel a lot better when it happens.
As for your emergency fund question, I think having at least $1,000 in a savings account you can touch right away is crucial. If it seems confusing to you, or you do want to earn interest on it (it’s not going to be too much), you can find a high-yield savings account. I myself use Capital One for banking because I love the Performance 360 Saving Accounts. You can link up to 25 of these accounts to your checking account, to have each serve as little saving buckets. If you use this system, you’ll be able to designate savings for your rent, your emergency fund, and any other saving goals you’d like to hit before next summer. Good luck—I’m rooting for you.
—Athena
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