However, what you do next will determine whether you remain debt-free or begin digging that hole all over again. Having survived climbing out of debt once, most people aren’t anxious to repeat the process. However, you’ll need a strategy to follow to help keep you on track.
Here are some steps to take after paying off your debts to help ensure you won’t have to do so again.
Keep to Your Spending Plan
Whatever it took to get you’re here is what it’s going to take to keep you here. In other words, the spending plan you followed to pay off your debt will continue supporting your current lifestyle just fine. Too many people get excited about the “extra” money they think they have after paying off their debts and blow it.
Instead, keep your spending plan just as it is.
Start an Emergency Fund
Open a high-yield savings account and deposit all the money you were using to pay off your bills into it. Your budget already excludes these dollars; putting them away for a rainy day is the smartest play.
As a result, you’ll be more likely to have cash on hand to deal with emergency situations when they arise — without going into debt. Plus, if the problem turns out to be bigger than your savings account, at least you’ll be in a position to pay part of it in cash so the resulting debt won’t be as large as it would have been.
Most financial experts consider an emergency fund adequate when it contains three to six months of your household expenses — including your rent and/or mortgage payment.
Beef Up Your Retirement Fund
Once your emergency fund is complete, pump that money into your retirement fund. Odds are you veered away from this while you were paying off your debts.
It’s time to give that money back.
Calculate where you would have been had you not been paying off the debt, set that as your goal and funnel the bill money into those accounts. Until it’s back at the level it should have been and let your regular contributions maintain it from there.
Find Some Sound Investments
Once you’ve got your retirement fund back on track, use that former bill-paying money to make some money. Perhaps it’s real estate. Maybe it’s a mutual fund. Whatever it is, do something with that money to make it make more money. Talk to a financial advisor to see what makes the most sense given the amount of money you have to invest each month.
Live a Little
Once you’ve taken care of all of the above, find something you’d like to do to reward yourself for being smart about these steps to take after paying off your debt. Maybe it’s a dream vacation. Maybe it’s a piano. Whatever it is, find something you’d like to do, get a handle on what it’ll cost, put money away until you’ve saved enough to pay for it in cash and have at it.
One Last Thing—
As these Freedom Debt Relief reviews from people undergoing debt settlement will attest, ridding yourself of debt can be a rather arduous task. Always remember and never forget: Credit cards are not your friends. Yes, they are a sometimes-necessary evil, but they should never again be looked upon as a tool for acquisition.
Now, with that said, there’s good credit and there’s bad credit. Good credit is credit you use to advance your financial situation in some way — in other words, you’ll net a financial gain from charging the purchase.
The used car vs. certified pre-owned (CPO) argument can typically be summed up with the phrase “you get what you pay for.” Both are technically used vehicles, but CPO cars have a few advantages that may be worth their price tag.
Why CPOs Cost More Than Regular Used Cars
A CPO vehicle is commonly called the cream of the crop of used cars, and its price tag often reflects this. CPO vehicles tend to be more expensive than standard used ones.
One of the biggest reasons why CPO cars are more expensive than their used counterparts is that CPOs are inspected by a manufacturer-certified mechanic. This means that every CPO vehicle must meet certain standards before it’s labeled as such. A true CPO is sold at a franchised dealership. Mom-and-pop dealers don’t have these vehicle options (and “dealer-certified” is not the same thing as a manufacturer-certified car).
Another reason for the higher price tag is that many CPO vehicles have just come off-lease. When a lessee returns a lease, the manufacturer’s likely to inspect to see if it qualifies for their CPO program. Since most auto lease terms are around two to three years, many off-lease cars make the cut when they’re returned clean and meet the low-mileage requirements. CPO cars are also refurbished, unlike regular used vehicles.
Each auto manufacturer has its own set of standards for their CPO cars, but the guidelines are usually in this ballpark:
Vehicles typically must have less than 80,000 miles
Some luxury brands require less than 50,000 miles
Typically must be less than ten years old, sometimes newer
Only one previous owner
Regular used cars don’t go through these rigorous manufacturer inspections before they’re sold. A used vehicle may be inspected in-house at the dealership before it’s sold, but likely not through the manufacturer like a CPO.
CPOs Are Covered
All CPO vehicles come with some sort of warranty, which adds to the overall cost, but offers peace of mind. Being on the newer side, many CPO cars may still be covered under their original manufacturer’s warranty and often include an extended warranty once that expires.
Some perks manufacturers may include in their CPO warranties include:
12-months of 24-hour roadside assistance
A 12-month warranty after the manufacturer’s warranty expires
A vehicle history report
Car rental coverage
Trip interruption benefits
Of course, manufacturers vary in what their warranties include when you purchase a CPO vehicle. Be sure to read through the exclusions of the warranty so you know what the terms are, how long you’re covered, and if there are any limitations.
Can Bad Credit Borrowers Finance a CPO?
Generally, bad credit borrowers are told to finance a used vehicle over a brand new one because used cars come with a lower sticker price, usually. However, while CPO vehicles tend to be a little more expensive than regular used vehicles, a CPO’s selling price is still likely less than a new car due to initial depreciation. Depreciation is loss of value over time due to mileage, age, and normal wear and tear.
Brand new vehicles lose a lot of value in the first two or three years of ownership, possibly up to 20% in that time, and it’s usually the steepest drop in value over the life of the vehicle. However, after those first couple of years, depreciation tends to slow down. If you opt for a CPO car, it’s usually much less expensive than its brand new equivalent, and very likely has already seen its steepest drop in value.
Sometimes the toughest part of car shopping is figuring out which dealership you can work with. There are so many dealers out there, and it can be tough for bad credit borrowers to tell which ones are signed up with subprime lenders that can assist with credit challenges.
At Auto Credit Express, we’ve crafted a nationwide network of special finance dealerships that are able and willing to help bad credit borrowers get the vehicle they need. Skip the search for a dealer with bad credit resources and let us do the legwork for you.
My husband signed a car lease for a friend. He told me he was co-signing because his friend had bad credit even though I objected to that and asked why his friend can’t just buy a used car. Then at the last second, my husband told me that his friend’s credit “was so bad he had to take out the whole loan” in my husband’s name only.
Aside from the fact this story doesn’t add up, he is now getting second notices for unpaid tolls and parking tickets, and just sends them to his friend and trusts him to pay. He ensures the lease payments are made every month, and tells me that tolls will send collections notices before reporting to credit-collection agencies.
He also claims that his friend has insurance, but that doesn’t add up. The state we are in requires the owner to have insurance. He tells me that none of this is my business, and I have no right to be upset. Yet every time another “past due” envelope arrives I panic at the thought of the savings I worked so hard to put away might be gone in one accident, and that the home I wanted to buy with our excellent credit won’t be possible anymore.
Can you help me explain to him why this was a very bad idea, and why it’s not “none of my business,” as he says? What options do I have to get us out of this mess before we lose everything?
You can email The Moneyist with any financial and ethical questions related to coronavirus at [email protected]
Yes, your husband is responsible for the vehicle insurance, especially if someone else is driving this car on a regular basis. If the documents say the borrower should be the primary driver, your husband’s arrangement with this friend is a “straw deal” and is likely also illegal.
But your problems go way beyond this car. Your husband’s willingness to take out a lease on behalf of a friend, and endure these collection notices, raises many red flags. What does your husband owe this person? Why would he go above and beyond any reasonable expectation of a friendship to risk his finances and credit rating in this way? The fact that he did this against your express wishes and good sense adds insult to injury. Something is wrong with the bigger picture.
As for your husband’s legal liability. According to Maggiano, DiGirolamo & Lizzi, a law firm based in Fort Lee, N.J., “As strange as it may sound, you can be held liable for a car accident that involves your vehicle — even if you weren’t present at the time. In most motor vehicle accidents, the negligent driver is the one held liable for any injuries or harm caused. However, in certain situations, the law can attribute fault to the owner of the car instead.”
The firm cites the legal principles of negligent entrustment and negligent maintenance. The first involves “entrusting your vehicle to someone who was unfit to drive.” Negligent maintenance “is the failure to properly maintain your vehicle, presenting a safety risk for anyone driving the car. This term ‘negligent maintenance’ is used because you have a duty to other drivers to keep your car in safe, working condition as to minimize the risk of an accident.”
Given that your husband owns the car and it is being driven by someone who is not paying its bills, and creating more costs through careless driving and bad parking, your husband is already fully aware that this is a bad situation. You are left without a “why” or action by your husband to address this. Take a closer look — with the help of an attorney — at your joint/separate finances, and explore ways to protect your savings. You also need to take action to restore your peace of mind.
Otherwise, you will be driving around in proverbial circles without knowing your legal and financial options. Whatever that potential action entails should be decided between you and your attorney in the first instance. I am willing to guess that this is not the first time your husband has made a decision in your marriage that has left you baffled. A lawyer should explain to you why it’s a bad idea to endure these kinds of unilateral decisions, and what you can do about them.
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Loans Bad Credit Online – China’s Very Bad Bank: Inside the Huarong Debt Debacle
It’s been 11 weeks since Lai Xiaomin, the man once known as the God of Wealth, was executed on a cold Friday morning in the Chinese city of Tianjin.
But his shadow still hangs over one of the most dramatic corruption stories ever to come out of China – a tale that has now set nerves on edge around the financial world.
At its center isChina Huarong Asset Management Co., the state financial company that Lai lorded over until getting ensnared in a sweeping crackdown on corruption by China’s leader, Xi Jinping.
From Hong Kong to London to New York, questions burn. Will the Chinese government stand behind $23.2 billion that Lai borrowed on overseas markets — or will international bond investors have to swallow losses? Are key state-owned enterprises like Huarong still too big to fail, as global finance has long assumed – or will these companies be allowed to stumble, just like anyone else?
The answers will have huge implications for China and markets across Asia. Should Huarong fail to pay back its debts in full, the development would cast doubt over a core tenet of Chinese investment: the assumed government backing for important state-owned enterprises, or SOEs.
“A default at a central state-owned company like Huarong is unprecedented,” said Owen Gallimore, head of credit strategy at Australia & New Zealand Banking Group. Should one occur, he said, it would mark “a watershed moment” for Chinese and Asian credit markets.
Not since the Asian financial crisis of the late 1990s has the issue weighed so heavily. Huarong bonds — among the most widely held SOE debt worldwide — recently fell to a record low of about 52 cents on the dollar. That’s not the pennies on a dollar normally associated with deeply troubled companies elsewhere, but it’s practically unheard of for an SOE.
Time is short. All told, Huarong owes bondholders at home and abroad the equivalent of $42 billion. Some $17.1 billion of that falls due by the end of 2022, according to Bloomberg-compiled data.
It wasn’t supposed to be this way. Huarong was created in the aftermath of the ‘90s Asian collapse to avert another crisis, not cause one. The idea was to contain a swelling wave of bad loans threatening Chinese banks. Huarong was to serve as a “bad bank,” a safe repository for the billions in souring loans made to state companies.
Along with three other bad banks, Huarong swapped delinquent debts for stakes in hundreds of big SOEs and, in the process, helped turn around chronic money-losers like the giant China Petroleum & Chemical Corp.
After Lai took over in 2012, Huarong reached for more, pushing into investment banking, trusts, real estate and positioning itself as a key player in China’s $54 trillion financial industry.
Before long, global banks came knocking. In 2013, for instance, Shane Zhang, co-head of Asia-Pacific investment banking at Morgan Stanley, met with Lai. Zhang said his company was “very optimistic” about the future of Huarong, according to a statement posted on Huarong’s website at the time.
Before Huarong went public in Hong Kong in 2015, it sold a $2.4 billion stake to a group of investors including Warburg Pincus, Goldman Sachs Group Inc., and Malaysia’s sovereign wealth fund. BlackRock Inc. and Vanguard Group acquired lots of stock too, according to data compiled by Bloomberg. The stock has collapsed 67% since its listing.
Lai had no trouble financing his grand ambitions. A big reason: Everyone thought Beijing would always stand behind a key company like Huarong. It easily borrowed money in the offshore market at rates as low as 2.1%. It borrowed still more in the domestic interbank market. Along the way Lai transformed Huarong into a powerful shadow lender, extending credit to companies that banks turned away.
The truth was darker. Lai, a former senior official at the nation’s banking regulator, doled out loans with little oversight from his board or risk management committee.
One Huarong credit officer said Lai personally called the shots on most of the offshore corporate loans underwritten by her division.
Money also flowed to projects disguised as parts of China’s push to build railroads, ports and more around the world – the so-called Belt and Road Initiative, according to an executive at a state bank. Huarong didn’t immediately reply to questions on its lending practices.
Given Lai’s fate, both people spoke on the condition of anonymity.
Huarong snapped up more than half of the 510 billion yuan in distressed debts disposed of by Chinese banks in 2016. At its peak, Lai’s sprawling empire had almost 200 units at home and abroad. Heboasted in 2017 that Huarong, having reached the Hong Kong stock exchange, would soon go public in mainland China, too.
The IPO never happened. Lai was arrested in 2018 and subsequently confessed to a range of economic crimes in a state TV show. He spoke of trunk-loads of cash being spirited into a Beijing apartment he’d dubbed “the supermarket.” Authorities said they discovered 200 million yuan there. Expensive real estate, luxury watches, art, gold – the list of Lai’s treasure ran on.
This past January, Lai wasfound guilty by the Secondary Intermediate People’s Court in Tianjin of accepting of $277 million in bribes between 2008 and 2018. He was put to death three weeks later – a rare use of capital punishment for economic crimes. Some took the execution as a message from China’s leader, Xi Jinping: my crackdown on corruption will roll on.
At Huarong, the bottom has fallen out. Net income plummeted 95% from 2017 to 2019, to 1.4 billion yuan, and then sank 92% during the first half of 2020. Assets have shriveled by 165 billion yuan.
The company on April 1 announced that it would delay its 2020 results, saying its auditor needed more time. The influential Caixin magazine this week openly speculated about Huarong’s fate, including the possibility of bankruptcy.
According to people familiar with the matter, Huarong has proposed a sweepingrestructuring. The plan would involve offloading its money-losing, non-core businesses. Huarong is still trying to get a handle on what those businesses might be worth. The proposal, which the government would have to approve, helps explain why the company delayed its 2020 results, the people said.
Company executives have been meeting with peers at state banks to assuage their concerns over the past two weeks, a Huarong official said.
The Chinese finance ministry has raised anotherpossibility: transferring its stake in Huarong to a unit of the nation’s sovereign wealth fund that could then sort out the assorted debt problems. Regulators have held several meetings to discuss the company’s plight, according to people familiar with the matter.
In an emailed response to questions from Bloomberg, Huarong said it has “adequate liquidity” and plans to announce the expected date of its 2020 earnings release after consulting with auditors. China’s banking and insurance regulator didn’t immediately respond to a request seeking comment on Huarong’s situation.
One thing is sure: Huarong is part of a much bigger problem in China. State-owned enterprises are shouldering the equivalent of $4.1 trillion in debt, and a growing number of them are struggling to keep current with creditors. In all, SOEs reneged on a record 79.5 billion yuan of local bonds in 2020, lifting their share of onshore payment failures to 57% from just 8.5% a year earlier, according to Fitch Ratings. The figure jumped to 72% in the first quarter of 2021.
The shockwaves from Huarong and these broader debt problems have only begun to reverberate through Chinese finance. Dismantling all or part of Lai’s old empire would show Beijing is willing to accept short-term pain to instill financial discipline among state-owned enterprises.
The irony is that Huarong was supposed to fix China’s big debt problem, not cause a new one.
“Allowing a state-owned financial institution that undertook the task of resolving troubles of China’s financial system to fail is the worst way to handle risks,” said Feng Jianlin, a Beijing-based chief analyst at research institute FOST. “The authorities must consider the massive risk spillover effects.”
— With assistance by Charlie Zhu, Jun Luo, Zheng Li, Dingmin Zhang, Evelyn Yu, Rebecca Choong Wilkins, and Tongjian Dong
Loans Bad Credit Online – China’s Very Bad Bank: Inside the Huarong Debt Debacle