News from the Tennessee Valley Columnists
MONDAY, APRIL 16, 2007

Dave Ramsey

Knock debt out instead of switching to fixed rate

Dear Dave: My wife is a doctor, makes $120,000 annually and she has $123,000 in student loans. About $86,000 of this amount are Stafford Loans on a variable rate. We were looking at having this paid off in six years. Recently, she was offered a fixed rate on these loans. Our combined income is about $180,000. What do you think? — Craig

Dear Craig: There’s nothing wrong with doing that, as long as the fixed rate is locked in and the company doesn’t extend the terms on you. But I wouldn’t wait six years to have this thing out of my life.

If you guys were used to getting by on about $60,000 before she became a doctor and now you’re making $180,000, that’s a difference of $120,000! I’d rather see you go back to living on a really tight budget and eating rice and beans for a year and a half to knock this debt out!

Freedom is never free, Craig. But if you guys get serious and work at it, you can get rid of that student loan debt and have lots more money in your pockets in no time! — Dave

Leasing a company car

Dear Dave: I know how you feel about leasing a car. But what about the car leasing programs that auto manufacturers offer their employees? — Stephanie

Dear Stephanie: Lots of automakers do this kind of thing, but I’d advise investigating the deal very carefully. And it wouldn’t hurt to take a cold shower first — just to make sure you wash off any car fever that may be clinging to you.

Some of the automaker offers are just another way for the company to fleece drivers. But some manufacturers offer their employees programs that aren’t a traditional lease. A few of them offer the use of a high-quality car for very little money per month and no hidden catches. In these cases it can work out pretty well. In some instances you’d lose more in value every month — even if you bought a car with cash — than you would pay out under a good employee program. Some companies even offer gas and more in the deal.

Just make sure you check the details thoroughly. Use your head and a calculator — not your heart — when making the decision! — Dave

Selling spec house

Dear Dave: I borrowed money to build a spec home several months ago and now I can’t seem to sell it. It has a construction loan of $78,000 against it but was appraised for $114,000 and has been on the market over seven months. What can I do? — Brett

Dear Brett: If the house has been sitting there that long and hasn’t sold, it sounds like the marketplace is saying the appraisal was wrong. If not, and most houses in that area are on the market for more than 200 days, then you shouldn’t have built a spec home there in the first place.

Check the MLS statistic for the average number of days homes in that area are on the market. If the average number of days on the market is 38, then you know you’ve got either a design flaw, quality problem or a pricing problem.

I’ve got a feeling you’re going to have to lower the price, Brett. Otherwise, the house is likely to sit there unoccupied for a long time! — Dave

Dave Ramsey Dave Ramsey
DAILY Columnist

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