2013 Board of Directors
Bruce Gottschall,
President Patricia Abrams, Vice-President Ofelia Navarro, Secretary Lawrence Grisham, Ex-oficio Director Calvin Holmes, Treasurer Joy Aruguete Joel Bookman Pamela Gecan Edward Jacob Brenda Palms-Barber Rosanna Marquez Robert McGhee Guacolda Reyes Marva Williams Staff
Kara Breems, Executive Director Teresa Lambarry, Outreach Director |
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Dear CCLT Homeowner,
Get into your most comfortable chair and relax, it's time for our monthly chat.
Building on thoughts from last month's Newsletter, this month we will go over several options for paying for large items that you might need to purchase. As we learned last month, developing a list of what we need and what we want is the first step in setting up a successful budget. Hopefully the articles in this month's newsletter will help you stick to your budget by shopping wisely and choosing the best way to pay for your purchases.
Also in this issue I have included a link to the City's Annual Clean & Green, on April 20th. After reading the flyer call your Alderman's office to find an event in your neighborhood. I know that I will be getting busy along with other members of my community. Whenever I give of my time to beautify my City it always gives me a great sense of accomplishment. It is one of the ways I give back to my City/Community.
At the suggestion of our Board of Directors, we have also added another section to the Newsletter: Community and Ward information. We hope this info will help you find out about events, ward services, community meetings, and other useful information that you might need and want.
Don't forget that we always love to hear from you and if you have any ideas on how to make the newsletter better, please let me know! Until next month,
Sincerely,
Teresa Lambarry
CCLT Outreach Director
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Whenever you are in the market for large expensive items, you have many options to consider when you decide how to make the purchase. We have looked into a few of your options below, and hope you find our research helpful!
Let's say you go to a rent-to-own store in your neighborhood for a washer/dryer. You find out that you can get a washer/dryer for $25.99 a week plus taxes of $2.46, for a total weekly cost of $28.45. Cash price for the washer and dryer is $1,100 plus $104.50 for taxes which makes for a total payment of $1,204.50 for the washer/dryer. The store is offering 3 months same as cash which means all the money paid in the first three months goes toward the total cash price of the appliances. After reviewing, if you choose to pay weekly, you will end up paying much more ($1,479.40) for the washer/dryer than if you bought it up front for $1,204.50.
Beware choosing the rent-to-own option. An article from MSN Money reported that rent-to-own customers often end up paying 2-3 times more for a rent-to-own purchase than they would have if they bought the item elsewhere. A rent-to-own company will price their merchandise higher in order to pay for overhead and other expenses. Also it may vary from store to store, but in some of the contracts, if you cannot make your monthly payment you will have to give the merchandise back to the store no matter how much money you have already invested.
Does rent-to-own ever make sense? Only if you need an item for a short period of time. While apparently some people believe they can build credit by making payments to a rent-to-own retailer this is typically not the case: rent-to-own stores are targeted to consumers with low credit credit scores and typically do not report to the credit bureaus. Option #2: Department Store credit card Next you go to a department store that is having a sale on appliances, and they have the washer/dryer that you are looking for, priced at $758 for the pair. The additional three year warranty (we'll talk about this later!) is $100 plus $159 for installation. You are also taxed at 9.5 percent. In order to not pay interest charges, you must pay off the appliances within 12 months.
However if you do not pay off the appliances within the 12 month period, you will then be subject to a 26.49 percent interest rate after the 12 month period is passed and for the remaining months until you finish paying. If this happens you will end up spending a lot more money for the appliances. The credit card industry counts on you paying the minimum monthly payment so they can collect the maximum amount of interest for your purchase. The longer it takes you to pay off what you charged on the card the more money the credit card company makes. If you don't make payments on time you risk getting a very high interest rate on your current and future purchases plus late fee charges on your credit card bill. Generally department store cards have a higher interest rate than your regular Visa or Master Card. So in other words, a better idea may be to just have one or at most two cards that are Visa or Master Card and use these for all your purchases. Make sure you don't charge more than half of your credit limit at any time or pay off your balance each month so you are not building up debt. Be careful with "teaser rates," when a credit company offers you 0 percent to 3 percent interest. The consequences are often severe because if you fail to meet their agreement, they can charge you a very high interest rate. Option #3: Credit Union or Bank loan You may also get a personal loan from a credit union or bank. Take into consideration that the interest rate that you will be offered is almost always affected by your credit score, but it will most certainly be less than the 26.49 percent charged by the department store. If you would borrow $1,000 and pay it in 12 months your monthly payment at 8 percent would be $86.41. Option #4: Buy It Used You also have the option to buy the appliances used-perhaps at a garage sale, online, on Craigslist.org, or through a local newspaper ad. You would probably be able to acquire the used washer/dryer for a lot less than if you buy new. You do, however, have other things to consider:
- Buying used you might be able to buy a better model
- You may pay less upfront but you will have to set aside money for future repairs
- You may have to deliver the items yourself or arrange for delivery through someone else
- Not knowing the actual condition of the appliances and maybe not getting an owner's manual, you might be buying a dud
- Will you be able to install the appliances yourself? If not, will you have to pay someone else to do it?
- Do you have the cash upfront to pay for the purchase?
I found an article online that shares some helpful advice on what items to buy new and what items you might consider buying used. The link to that article is here.
Option #5: Pay Cash
For some stores, walking in with cash will get you a better price on the merchandise. Cash gives you:
- Flexibility to purchase the appliances wherever you choose - department store, garage sale, or through a newspaper ad.
- Bargaining power: you can bargain with the seller because you can pay all costs up front
- The option to avoid risk - paying late fees, etc.
- Opportunity to avoid interest rates
Buy or not buy a Warranty?
Ever wonder if you should buy an extended warranty with that big purchase? I often wonder - but a bit of internet research seems to indicate that most people don't think it's a good idea. Here's a link to an article that might help you make a decision.
Article adapted from Keeping the American Dream NeighborWorks Manual 2005, 2009, 2012
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From my experience as a housing/credit counselor I saw first hand that people would often get into trouble when they had bitten off more than they could chew, with regards to expensive purchases.
Clients that got into trouble had never made a budget to see if they would be able to afford making the new payment for whatever they were buying.
I truly believe that the trick is to always ask: is this purchase a need or a want? Can I do without it? More importantly, will the additional payment put me at risk of not being able to make my monthly payments such as my mortgage and other important payments on time?
So before you buy, think, plan and make a new budget taking into consideration the additional payment. If it works, you can do it. If it does not, then save some money first so if you cannot pay it off completely at least you have some money to put down so the monthly payment will not be so burdensome.
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Learning Opportunities from our Partners
| Money Smart Week is from April 20th to April 27th. There are more than 500 financial education events during the week at financial institutions, not-for-profits, schools and libraries. Use the link to find classes that might interest you including how to spend, save, and borrow wisely. You will also get more information on how to participate in a Scavenger Hunt that gives you a chance to win a $600 Apple Gift Card or other cash prizes.
Chicago Conservation Corps has many opportunities to volunteer or go for a bird walk for free, as well as other fun stuff to do. |
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Get Involved in Your Community
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Clean & Green is an annual opportunity to be part of beautifying your community. This flyer has more information. Call your Alderman's office to sign up to volunteer. I have signed up in my neighborhood, maybe I'll see you out there!
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Community and Ward Information
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CCLT homeowners live in the 2nd, 3rd, 26th, 27th, 28th, 35th, 46th, and 49th Wards. I did a little research to find links to your ward information. By using the link provided below, you will find a wealth of information regarding your Alderman, your Ward, and your Community, including, in some cases a link to sign for the Ward's newsletter. If you do not know what Ward you are in or we missed you, please give me a call or shoot me an email and I will let you know.
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Event Calendar
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Click here to visit our calendar, which includes both our CCLT pre-purchase education schedule AND the post-purchase homeowner classes that are available at no cost to all CCLT homeowners. |
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