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Old 08-03-2011, 04:41 PM   #15
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Amen that.
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Old 08-03-2011, 04:51 PM   #16
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Buying a new Phaeton and we got 5.21%. We are full timers without a house. Used Essex Credit owned by Bank if the West.
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Old 08-03-2011, 04:55 PM   #17
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Quote:
Originally Posted by Francesca View Post
What does "strategic default" mean, anyway?
Is that actually planning not to pay one's bills?
It is, but in this case he would be defaulting on himself. He borrowed his own money from his 401k and the default would be that he does not pay himself back. He would owe the government taxes and penalties. I personally think borrowing from a 401k is a bad idea.
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Old 08-04-2011, 08:08 AM   #18
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I use USAA for vehicle loans, insurance, and banking. My RV loan interest rate is a bit higher than others but I have credit card debt (who dosen't) and most companies shy away. Having been with USAA since the days when all they had was car insurance I know them and most important they know me.

I recently retired from being a full time towboat captain and am now a contract pilot and work when I want to and when I want to and make the same annual income. Try explaining that to some loan officer. USAA has it in my file and they list me as Self-employed.

Its nice to do business with someone I trust.. All my various retirement incomes pay the bills, contract piloting pays off the debt and puts money in my travel fund. They even had a financial planner call me and USAA is now on board with my plan.

For this kind of relationship I pay the 7%. For me its worth it.
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Old 08-05-2011, 12:18 PM   #19
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I did a home equity loan through Lending Tree and got .25% below prime.
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Old 08-05-2011, 12:29 PM   #20
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Just a reminder - If you claim your MH as a "second home", you can deduct the loan interest.

Check IRS.Gov for info.
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Old 08-06-2011, 09:37 AM   #21
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And I do every APRIL!
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Old 08-06-2011, 09:51 AM   #22
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I just refied mine thru Essex Credit, they have several programs right now, if you belong to Costco, they are at 4.94%, FMCA is 5.15%, and I think Good Sam is right in the same as FMCA.

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Old 08-06-2011, 12:36 PM   #23
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Quote:
Originally Posted by Francesca View Post
What does "strategic default" mean, anyway?
Is that actually planning not to pay one's bills?
When you borrow from a 401k that is sheltered from taxes you are in essence taking a loan from yourself in un-taxed dollars. You are set up on a payment plan, the payment is usually deducted from you pay roll check until paid back. The bad thing about this scenario is you pay back into a sheltered account with taxed dollars and in the future when you withdraw the money again you pay taxes again! Great deal for the IRS isn't it!!! Now if you are under 59 1/2 years old and default it doesn't affect your credit rating since you borrowed from yourself, however the loan you took is converted over to a distribution and is subject to taxes. If under 59 1/2 you also pay a 10% early distribution penalty!

Think of this! Your 30 and take out a 401K loan for 5 years for 50K. you pay it back with taxed $ and you in a 25% bracket. a couple of years after you pay back your loan you borrow another $50K. Again pay the loan back with taxed $. Then you do it a 3rd time and default you pay the 25% in tax plus the 10% penalty. Your $50K loan that you took 3 times ends up costing you 85% in tax

Think hard about a 401K loan. It should be your last option.
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Old 08-07-2011, 07:18 AM   #24
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I just refied mine thru Essex Credit, they have several programs right now, if you belong to Costco, they are at 4.94%, FMCA is 5.15%, and I think Good Sam is right in the same as FMCA.
Dennis
When Essex quoted me a couple of months back, it was 5.22%; but they had a $500 closing cost which changes the APR. The closing cost wasn't high, but when I financed with Bank of the West at 5.25 there was no closing costs.
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Old 08-07-2011, 03:39 PM   #25
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Becareful with Essex. They are a sub of Bank of the West. Ok bank, but in the dark ages. No statements, no on line service..you have to REQUEST a 1099 for interest at year end....we transferred to USAA after 7 months with them and it took a threat of legal action to get them to release the title after USAA paid them off....took almost 6 MONTHS!!
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Old 08-14-2011, 11:10 AM   #26
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I just financed my new purchase through Bank of the West. The loan is only a week old so I can't comment on all the statements regarding infrastructure, support, paperwork, etc. But if you go to bankofthewest.com they certainly do have a pretty and extensive web site. And I can vouch for their low rates. So if you want to pay a hundred or more dollars a month for the conveniences of another bank, you have more money than I do.
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Old 08-14-2011, 01:43 PM   #27
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Originally Posted by mdy1950 View Post
When you borrow from a 401k that is sheltered from taxes you are in essence taking a loan from yourself in un-taxed dollars. You are set up on a payment plan, the payment is usually deducted from you pay roll check until paid back. The bad thing about this scenario is you pay back into a sheltered account with taxed dollars and in the future when you withdraw the money again you pay taxes again! Great deal for the IRS isn't it!!! Now if you are under 59 1/2 years old and default it doesn't affect your credit rating since you borrowed from yourself, however the loan you took is converted over to a distribution and is subject to taxes. If under 59 1/2 you also pay a 10% early distribution penalty!

Think of this! Your 30 and take out a 401K loan for 5 years for 50K. you pay it back with taxed $ and you in a 25% bracket. a couple of years after you pay back your loan you borrow another $50K. Again pay the loan back with taxed $. Then you do it a 3rd time and default you pay the 25% in tax plus the 10% penalty. Your $50K loan that you took 3 times ends up costing you 85% in tax

Think hard about a 401K loan. It should be your last option.
if the choice is borrow 50k from a Bank at 4.5% or borrow 50k from your 401k at 4.5% and you are going to be paying back with taxed $'s then I would have to say that part of the equation is a wash. If 4.5% is better return than you're earning now. hit the 401k you'll be paying youself back.
Be aware that the term of the loan is a maximun of 5 years.
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Old 08-15-2011, 03:05 PM   #28
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USAA now has offered us a 4.64% loan since their earlier offer of 5.39% last fall.. We think that we will probably take them up on that. They are a first class bank in my opinion. With the second home deduction, our effective rate will be even less. Now, we could lose more money by leaving it invested, which is scary.
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