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It’s Tough to Get a Car Loan
Looking for some good news in the current economic mess? Well, the national average price of a gallon of regular unleaded has dropped to “only” $3.480! Of course, if you remember gas well below $2.50 per gallon just three years ago, that news can seem less than exciting. So maybe you’re thinking of parking your giant, gas-guzzling SUV and buying something more fuel efficient. Unfortunately, thanks to the credit crunch, buying a car these days is no easy task.
While all the recent news has been primarily concerned with the crisis in residential mortgage backed securities, auto loans are in trouble, too. The percentage of auto loans considered delinquent (payments more than 60 days past due) jumped 11.5% in the second quarter of 2008 from the same quarter last year. That’s an even bigger problem when you consider that, according to Peter Turek, automotive VP in TransUnion’s financial services group, the average auto debt has also increased about 2% ($12,869 in the second quarter, compared to $12,630 in the second quarter of 2007).
This is just another illustration of the ripple effect that bad mortgages have caused throughout the rest of the economy. Slumping housing prices means homeowners have less equity in their homes. Without access to that equity to finance their car purchases, more people have taken out car loans. But as more people are trying to buy fuel-efficient cars, Turek predicts that both the size of the average car loan and the rate of delinquencies will rise.
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Bailout Breakdown
Markets were in a free fall after the House rejected the controversial $700 billion bailout plan. Though both President Bush and Treasury Secretary Hank Paulson strongly backed the plan as crucial to preventing even more widespread economic problems, the vote was 228-205 against the comprehensive package.
So what made the Emergency Economic Stabilization Act of 2008 so controversial? Here are the basics of the arguments on each side.
Pros
- Prevent Recession: Clearly, the financial industry is in big trouble. Bush and congressional leaders have warned that, if the government doesn’t step in to shore up these financial institutions, the economy could slide into a serious recession. Read More »
Have a Student Loan Question? We Have Answers.
Have questions about paying for college? Let me introduce you to our newest guru, Mark Kantrowitz.
We’re lucky to have him join the FiLife team as our resident student loan guru. Mark’s a leading expert on financial aid and student loans, and has authored numerous books on the subject. His latest book, FastWeb College Gold, is a helpful step-by-step guide about how to get the cash you need to pay for school.
Mark is also the founder of FinAid.org, a leading source of unbiased, straightforward info, advice, and tools for figuring out how to pay for college. Check out the site for calculators that can quickly calculate tuition costs, expected family contribution, and loan payments. He also serves as director of advanced projects for FastWeb.com, the most popular and extensive site for matching students with scholarships (and it’s free!)
Paying for college is tricky. Tuition costs keep rising and the loans and payment options you pick now can impact your life for years after graduation. That’s why Mark joined FiLife – to give you sound, clear advice on these important issues. If you have general questions about the process of obtaining financial aid or student loans, or more specific questions about your own situation, you can ask Mark directly by going here.
He’s already helped several FiLifers figure out some loan issues. Check out the advice Mark recently offered on Parent PLUS loans, Grad PLUS loans, calculating monthly payments, and refinancing loans to get a lower interest rate.
You Probably Need Renters Insurance
I’m living pretty dangerously while interning at FiLife this summer.
I confess: I rented an apartment for the summer and… I did not get renters insurance. This was foolish for several reasons.
1. My laptop is by far the most valuable thing I own. Yet I usually leave this prized possession lying on my bed in my walk-up three bedroom apartment. I just cross my fingers that my roommates will remember to lock the door when they leave.
2. My culinary skills aren’t great. I started a small microwave fire once…or twice. If one of these fires ever gets out of control, I’ll be responsible for destroying the valuables of everyone else who lives in the building, in addition to my own.
3. I really should have learned in my first year of law school that if a visiting friend falls down the stairs and hurts herself, she can sue me.
Luckily, none of these things happened while I was uninsured. I plan to take out a renters insurance policy when I move into my new place this fall.
So how do you know if you need renters insurance? It’s pretty safe to say that if you’re a renter, you need renters insurance.
Paying for School is Tough These Days
Finding a way to pay for your college education has always been stressful. But this back-to-school season in particular seems to have students and parents frantically scrambling to secure the cash they’ll need when classes resume. Tuition fees are still increasing. Textbook prices are through the roof. Higher grocery prices are likely to strain a full-time student with no source of income (other than Mom and Dad). And this year, it’s harder than ever to secure a school loan.
The struggling economy has many Americans watching their pocketbooks, which means a huge drop in sales-tax revenue for the states. Unlike the federal government, which has the luxury of being able to run an enormous deficit, states have to balance their budgets—and they’re struggling like the rest of us. But rather than raise taxes in an attempt to recoup their lost tax revenue, states have opted for tuition hikes.
So you’ll just take out a larger loan to cover tuition, right? Not so fast. Thanks to the turmoil in the financial markets, many financial institutions are reducing their student loan offerings.
Fortunately, there is some relief on the horizon. Earlier this month, Congress passed a college-oversight bill, which mandates greater transparency in rising tuition costs. While this bill won’t necessarily mean a drop in tuition prices, it will at the very least put pressure on states to maintain their level of spending on public universities.
Meet the Money Regulators
Reading the news in the financial world lately means wading through an alphabet soup of federal regulatory agencies. Here’s a quick glossary to brush up on some of those acronyms.
FDIC (Federal Deposit Insurance Corp.): The FDIC is a government corporation which insures deposits of less than $100,000 in member banks. But be careful–the FDIC only insures checking accounts, savings accounts, and certificates of deposit. Other financial products offered by many banks, including mutual funds, annuities, and life insurance are not insured.
In the News: A Deposit-Protection Primer
NCUA (National Credit Union Administration): Essentially, the NCUA provides the same protection to credit-union deposits that the FDIC provides to bank deposits.
In the News: Federal Insurance Protection Strong at Mid-Year
Fed (Federal Reserve System): The Federal Reserve System (often referred to as “The Fed”) is the central bank of the United States. The Fed is a quasi-public bank (meaning that it is a government entity that also has private components). The Fed not only functions as a central bank (i.e., a “bankers’ bank” and the government’s bank), but also exists to address the issue of bank panics, and to create balance between private banks and the responsibility of government. Ben Bernanke currently serves as the Chairman of the Board of Governors of the Federal Reserve System.
In the News: Oil Retreat Takes Pressure off Fed
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The Hard Hit God Market
Americans have a peculiar way of blending capitalism and religion (or, some would argue, making capitalism their religion).
A look at popular fads during happier economic times illustrates this point. A few years back, everyone from Madonna to Ashton was sporting oh-so-trendy $26 red strings on their left wrists, believed by followers of Kabbalah, a Jewish mysticism tradition, to ward off the Evil Eye. Or you could pick up a Gucci yoga mat for a mere $870 (enlightenment not included). While it may be hard to picture an ascetic yogi meditating on such an expensive piece of plastic, a wait list quickly formed as designer spirituality sold like hot cakes. And why pick up a plastic rosary for free after Mass when you can get this sterling silver rosary from Tiffany & Co. for only $695?
While buying spirituality may have been an attractive way for Americans to spend excess cash in the past, it appears that cutting spending on God is now a good way to save some extra cash. Meanwhile, faith-based organizations are experiencing a surge in demand for their services—and they’re struggling to make ends meet.
The Latte Effect
After weeks of nail-biting suspense, Starbucks has finally released the list of the 616 doomed stores it will be closing this year. I got a little teary-eyed when I found this store in Austin on the list. It was a frequent caffeine pit-stop for me. But then I got to thinking about what that little cup was costing me. I did the math and, at $4.56 per cup, realized I was spending an appalling $1,664.40 on coffee a year. This was my first real, concrete experience with the horrifying “latte effect.”
While the term “latte effect” really describes any small but frivolous expenditures which can add up to a hefty chunk of your paycheck, in my case the culprit literally was a latte. I had complained about gas exceeding $4 per gallon, while gladly forking over what amounts to $82.08 per gallon for my sugar-free hazelnut soy latte. Such an extravagant expenditure hardly seems justifiable on a student’s tight budget.
100 Bottles of (Pricier) Beer on the Wall…
Everyone’s chattering about oil prices but, with the Fourth of July weekend quickly approaching, you should be concerned about the costs of some other barrels-beer barrels.
I’m sure you’ve noticed the higher prices each time you refuel at the tap. USA Today recently reported that supermarket prices for a case of beer were up 3% in May from the same time last year. This is the biggest jump in beer prices we’ve seen in the past 2 ½ years. One of the primary causes (in addition to rising costs of fuel, cardboard, and aluminum) is none other than… cows. That’s right. Corn, a traditional feed grain, has become increasingly expensive now that more is being sold to make ethanol. Without this barnyard staple, farmers are turning to other feed grains-such as the barley that is malted to brew beer-to feed livestock.
But rising beer prices shouldn’t mean you can’t celebrate the Fourth, American style. According to the Beer Institute, Americans drink more beer on the Fourth of July than on any other day of the year. So how can you be patriotic without breaking the bank? More after the jump. Read More »
Curious About Your Co-workers’ Salaries?
The Wall Street Journal recently covered the launch of a new salary comparison site, Glassdoor.com. I found the website intriguing — as a law school student who has yet to have a “real” job, I don’t have any idea of what I might earn when I receive my degree. So I decided to check it out.
The website offers a sample of employee reviews and salaries for some large companies, including Yahoo! and Google. But if you want to search through other companies, you have to create an (anonymous) account and provide some information of your own: if you want to view salaries, you need to enter your salary from a current or previous job. The same goes for reviews and ratings; in order to gain access, you’ll need to submit at least one review.