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Author: whineluvr One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308881  
Subject: Deferred Interest Date: 2/5/1998 1:12 PM
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Last year I made 2 purchases of furniture in which I took advantage of the "no interest for a year deal". I have been making payments thru the year of $20 and $50 so that I have about halved the outstanding balance. The no interest option expires in June. I have a small portfolio of stocks (value around $2000) that, if I sell them, would net a loss of about $200 on my original investment, but would pay off both purchases.

So, question is, should I sell the stocks now, take the loss and pay off these 2 purchases or keep the stocks, see what happens with the market and sell right before I get nailed with a year's worth of interest? (If I sell the stocks now, that gives me an extra $70 a month to pay off credit card balances, but if I don't, the stocks may soar). I am trying to decide if this is a classic case of "A bird in the hand is worth two in the bush".

I am looking for the most Foolish approach :).
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Author: TMF2Aruba Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 597 of 308881
Subject: Re: Deferred Interest Date: 2/5/1998 5:48 PM
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<<Last year I made 2 purchases of furniture in which I took advantage of the "no interest for a year deal". I have been making payments thru the year of $20 and $50 so that I have about halved the outstanding balance. The no interest option expires in June. I have a small portfolio of stocks (value around $2000) that, if I sell them, would net a loss of about $200 on my
original investment, but would pay off both purchases.

So, question is, should I sell the stocks now, take the loss and pay off these 2 purchases or keep the stocks, see what happens with the market and sell right before I get nailed with a year's worth of interest? (If I sell the stocks now, that gives me an extra $70 a month to pay off credit card balances, but if I don't, the stocks may soar).>>

This is a toughie. My gut reaction is if you have some quality companies in your portfolio, you might consider keeping that as an emergency fund, and hold off from liquidating it. It sounds as if you won't have that much of a balance left on your furniture anyway, so you might want to see if you can just scrimp a bit to send in as much as you can with each payment.

While you'll incur interest charges on the balance, it may well be a worthwhile trade off as opposed to selling the stocks. You never know when a real crisis may occur when you'll be glad that little nest egg was there. Additionally, if you find that making the payments becomes too much of a burden, you will always have that option. But if you sell the investments now, it's gone, with no guarantee that you'll be in a position to start them up again.

Just my thoughts,

Tony
...but I still am...

Off2Aruba



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Author: RecoveringFool Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 598 of 308881
Subject: Re: Deferred Interest Date: 2/5/1998 5:52 PM
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If it's anything like the deals I've had in the past if you don't pay it off by the end date, you owe interest on the ENTIRE amount purchased to the tune of 20ish %. If this is correct, move heaven and earth to pay it off before then. (Remember, though, I am the one who thinks debt is pretty much simply bad :)


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Author: pwyles Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 599 of 308881
Subject: Re: Deferred Interest Date: 2/5/1998 6:57 PM
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<<Last year I made 2 purchases of furniture in which I took advantage of the "no interest for a year deal". I have been making payments thru the year of $20 and $50 so that I have about halved the outstanding balance. The no interest option expires in June. I have a small portfolio of stocks (value around $2000) that, if I sell them, would net a loss of about $200 on my original investment, but would pay off both purchases.>>

Since you have paid about half the balance, and you are about half way through your one year same as cash keep making your monthly payments. Every "one year same as cash"/"no interest for a year" deal I have seen has a clause in it that says if you don't pay within a year the interest is 21% retroactive to day 1. So you don't get bit by this I would divide the outstanding balance by the number of remaining paymnets (4 or 5 depending on if you have made a February payment) and pay that amount monthly.

~~paul

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Author: mjskas Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 600 of 308881
Subject: Re: Deferred Interest Date: 2/5/1998 11:59 PM
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I have to agree with RecoveringFool on this. If your plan is like the 2 that I've been in, you get zapped with all of the back interest. Even if your balance at the end of the deferred period is $.01. If you decide to hold any of this debt, make sure you understand the interest calculation. You might find another $300-$400 tacked onto your July statement.

I also agree with TMF2Aruba in that you should try to scrimp and pay it off without touching your investment.

pwles makes a good point (I'm so agreeable today:-) to divide up the remaining balance by the number of remaining payments, but make sure your last payment is *early* enough to clear before the expiration period.

Excellant advice and workable solutions abound!

I do have one point of my own to add. You are currently in the unfortunate position of trying to decide whether or not to liquidate investments to pay off debt. This is precisely why I have an emergency fund, and why most Fools recommend at least a minimally funded one. If your investing with the assumption that your investments are your E-fund, it's best to take another tack. Of coarse, this doesn't help with your current situation but it is worth future consideration.

As I've said before, I want to invest on my terms - to buy and to sell when I want to. Not when my car, roof, Mastercard, or [insert your emergency here] dictates it. Give me an E-fund or I'll not invest.

Good luck.

Mike

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Author: Jackstone Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 601 of 308881
Subject: Re: Deferred Interest Date: 2/6/1998 11:44 AM
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I know many people don't like this idea, but a credit card is another option, if you can get approved for one of those 5.9% APR ones. You can just get a cash advance for the remainder of the furniture (if you haven't paid it off already), and then you can continue your monthly payments to the credit card instead of the furniture company. There are really two dangers in this tactic though.

1) You may be tempted to run up the charge card on other things.

2) You may be tempted to just pay the minimum balance and do that forever.

If you're the type of person to be lured into either of these credit card 'sins', I would follow one of the other plans...

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Author: TMFRunkle Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 604 of 308881
Subject: Re: Deferred Interest Date: 2/6/1998 11:16 PM
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<<Last year I made 2 purchases of furniture in which I took advantage of the "no interest for a year deal". I have been making payments thru the year of $20 and $50 so that I have about halved the outstanding balance. The no interest option expires in June. I have a small portfolio of stocks (value around $2000) that, if I sell them, would net a loss of about $200 on my original investment, but would pay off both purchases.

So, question is, should I sell the stocks now, take the loss and pay off these 2 purchases or keep the stocks, see what happens with the market and sell right before I get nailed with a year's worth of interest? (If I sell the stocks now, that gives me an extra $70 a month to pay off credit card balances, but if I don't, the stocks may soar). I am trying to decide if this is a classic case of "A bird in the hand is worth two in the bush". >>

Take a look at the interest you will pay on those purchases. Usually, it is obscenely high if you don't make the time period on those interest free financing plans. You may find a $200 loss is minor compared to the interest you'll pay.
George

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Author: goals Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 610 of 308881
Subject: Re: Deferred Interest Date: 2/9/1998 6:50 PM
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Trust me...
From experience I can say that if you don't make a concerted effort to pay them of you will (gulp) make min. payments and then die, and then your kids will keep making payments for you.

Getting by with the min. payment only allows you (for better or worse) to put that money it something else.

I may be considered a fine example of credit card irresponsibility. I managed to get 70k in debt 10 years ago. I am now down to 12k. I have one debit card and an Amex card.
The rule is if I dont have the money - I dont buy it.
It takes work to get out of that inviting hole, do it now while you can. You dont know what may be lurking around the corner were you might not be able to have the choices you have before you now....



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