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DEBTSMART EMAIL NEWSLETTER - Tools for financial success!
A Free E-Mail Newsletter from DebtSmart Online and Press One Publishing. ISSN 1538-6740
August 31, 2001 Issue 7
Scott Bilker, Editor and Publisher, mailto:publisher@debtsmart.com
Richard Crammer, Editor, mailto:editor@debtsmart.com
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For instructions to SUBSCRIBE, and DISCLAIMER, see bottom of this email.

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IN THIS ISSUE
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=> Advertisers

=> Cool Debt Statistic

=> Letter from the Publisher

=> "Manipulating the System"

=> CONTEST RESULTS from 8/17/01

=> Contest and Survey

=> Auto Lease

=> Disposable Credit Card Numbers

=> Your Finances

=> Subscribe/Disclaimer Information
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We have done our best to ensure that all advertisers included in the DebtSmart Email Newsletter offer quality products and services. However, if you have any problems, please let us know by sending mailto:comments@debtsmart.com 

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COOL DEBT STATISTIC
Source: National Foundation for Credit Counseling (NFCC) News

Americans charged more than $1 trillion on their VISA, MasterCard, Discover and American Express cards during 1999.

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Letter from the Publisher
by Scott Bilker

Thank you all for another fantastic response to the contest and survey! This week's contest question is a little more challenging--enjoy!

I want to ask you to do me a favor. Please let people know about the DebtSmart Email Newsletter and DebtSmart Magazine. I want to get our DebtSmart philosophy out to as many people as possible so everyone can save!

One good way to do this is to post a message on a MESSAGE BOARD telling people they can sign up to get the magazine free. Include the below link so people can subscribe: http://www.debtsmart.com/pages/freesubscription.html

The results of the survey indicate that the most popular response for number of articles in the email newsletter is five. You have spoken and five is the number of articles we will aim to include.

The first article in this issue, "Manipulating the System" is about a phone solicitation for a mortgage. I think you'll like this one so please read this entire story.

This week's survey is really a question. I want to know about the most entertaining telemarketing call you ever received. Please tell me your story. Selected story(ies) will be featured in upcoming email newsletters.

You can reach me with your comments at: 
mailto:publisher@debtsmart.com 

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"Manipulating the System"
 by Scott Bilker

It's Friday night and the phone rings... you know the call, it's late, the last bite of my dinner being chewed, all you want to do is watch TV and relax. Guess who's calling? Yes, it's a mortgage company that's trying to sell me a refinance deal!

The girl asks me about my mortgage, my rates, and my credit card debts. To which I do reply, after all I'm always curious about getting a better loan (plus I love toying with these people).

I ask her what their best rates are. She tells me that it depends on my credit history. I said, "Okay, say I have a credit rating like Bill Gates. NOW what's your best rate?" She said that she can't quote a rate however, the loan officer would let me know. So I agreed to have the loan officer give me a call.

On Monday, while I'm trying to set up the new DVD player, the phone rings. Guess who? It's the loan officer, let's just call him Kevin. Well okay, so Kevin is really his name. I'm not going to change names to protect the innocent. :)

Kevin starts his spiel about how he can save me money on my $110,000 30-year, 6 7/8% mortgage and $15,000 of credit card debt. I asked him what his best rates are and he told me it varied depending on my credit score, which he could check if I tell him my social security number--I don't think so! There's no way I'm giving that out over the phone. If his deal sounds real then I'll ask for paperwork to be sent through the mail.

I told him to assume that "My credit history is the best of anyone on earth and in this universe. Now, what is your best rate?" He told me 6.5% with 1 point.

He went on to explain that unlike other mortgage companies that ask for the 1 point at closing, they "conveniently" include that amount in the mortgage principal. I told him that 6.5% isn't that much better than my 6 7/8% (6.875%) and when you throw in the 1 point then your "best" loan is really around 6.6%.

That's when he asked me what my credit card rates are. I told him that my credit card debts are at about...

To read the rest of this article clicking below:
http://www.debtsmart.com/cgi-pl/go/010831_email_news.cgi?1&7428 

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CONTEST RESULTS from 8/17/01
by Scott Bilker

Congratulations to Tiffiny who won the third contest offered in the DebtSmart Email Newsletter! And congratulations to everyone as a group because 83% of the respondents had the correct answer!

QUESTION: You have an outstanding credit card balance of $5,500 at 15.99% APR (fixed) and you're making payments of $99.87 per month. With those payments this loan will be paid off in exactly 100 months. You decide to save money by transferring this balance to an 9.99% APR (fixed) and keep making the same monthly payment of $99.87. The good news is that you can now pay off your loan in only 74 months! How much money do you save? Is it $2,596, $2,182, or $1,768?

ANSWER: $2,596 Since the payment is kept constant, the total savings is equal to the number of payments not paid. It takes 100 payments to pay off the 15.99% loan and only 74 payments to pay off the 9.99% loan.

Therefore, you save 26 payments or 26 times $99.87, which is $2,596.62, when comparing the savings over a 100-month period.

It's important to recognize that you're really saving money THE ENTIRE TIME! The savings is relative to every point in time. In the problem I implied that you need to find the savings over the entire 100 month period, however, there are savings every month. Let's compare both loans one month at a time.

Before the first payment, each loan has an unpaid balance of $5,500. Total savings is zero. However, after the first payment is made, the balance remaining on the 15.99% loan is $5,473.42 and the balance for the 9.99% loan is $5,445.92. That means that you saved the difference, $25.50, after the first payment.

The 9.99% loan is paid off at payment number 74 which means its balance is zero. So what would you still owe on the 15.99% loan? That amount is $2,181.97.

From this point forward all the payments that would have been made to the 15.99% are saved because you have the 9.99% loan.

You can see a graph of the savings and table with all the numbers at:
http://www.debtsmart.com/cgi-pl/go/010831_email_news.cgi?2&7428 

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Contest and Survey
by Scott Bilker

As usual, the first person to reply with the correct answer wins an autographed copy of my best-selling book, "Credit Card and Debt Management"!

QUESTION: Which loan is better and why?

Loan 1: $100,000.00, 30-year loan, with monthly payments of $665.31. That's a total out-of-pocket cost of $665.31 x 360 months = $239,511.60.

Loan 2: $100,000.00, 15-year loan, with monthly payments of $1,014.27. That's a total out-of-pocket cost of $1,014.27 x 180 months = $182,568.60

SURVEY: This week's survey is really a question. I want to know about the most entertaining telemarketing call you ever received. Please tell me your story. Selected story(ies) will be featured in upcoming email newsletters.

Enter contest by clicking on the below link:
http://www.debtsmart.com/cgi-pl/go/010831_email_news.cgi?3&7428 

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Auto Lease
by Gary Foreman

Dear Dollar Stretcher, I would like some advice on how to sell, trade-in or otherwise get rid of a car. I have a 2000 Toyota Camry with 53,000 miles on it. The lease is up in 2004. The last car dealer I spoke to told me that I needed to wait for the lease to be up in order to trade down. He said that the difference between what I owe and what it's worth is $10,000 and that my mileage should be okay if I move closer to where I work. Is this person telling me the truth? Is there any other way I can get a lower car payment or get rid of this car before 2004? My goal is to be a stay-at-home mom to my little boy and this car payment is stopping me. --Linda

Linda has asked a question that I get regularly. How can I get out of a car lease? Anyone who is already leasing or thinking about leasing should consider how they would answer Linda's question.

Linda needs to recognize that a car lease is fundamentally different from buying a car and making payments. When you buy a car you own it and have agreed to pay a certain amount for it. You can sell the car. Typically you can pay your loan off early.

When you lease a car you've agreed to keep it and make payments for a certain period of time. You do not own it. So you can't sell or trade it.

A typical new car depreciates approximately 30% in the first year. Linda's car isn't typical. It's a high mileage car. A Camry with her mileage is worth about $8,000 less than when the car was new. She hasn't paid that much so far. But she will before the lease is over.

A trade isn't going to help even if she went to a much older, cheaper car. It will cost thousands to walk away from the Camry. Unless she can pay that amount now, it will just be added to the cost of the 'cheaper' car. The end result would be payments that are similar to what she already has.

If Linda insists on trying to terminate her lease, she should do it directly with the leasing company. Involving a car dealer could cost her more.

Linda will need to read her lease ...

Read the rest of this article by clicking below:
http://www.debtsmart.com/cgi-pl/go/010831_email_news.cgi?4&7428 

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Disposable Credit Card Numbers
by Rebecca Lindsey

If you've ever purchased anything on the Internet, you are probably a big fan of the ease and efficiency of the purchase, along with the "delivered to your door" aspect. Despite the recent downfall of many online companies, shopping online remains very popular. In fact, eMarketer.com, a research firm that focuses on online trends, predicts online business to total $65.9 billion in the year 2001, a 57% increase from 2000.

Is online shopping really safe?

Stories of high-tech hackers breaking into company databases on the Internet to steal customer information (such as credit card numbers) stop many people from making online purchases. Although these types of problems don't happen often, there is an ever- present fear among consumers that the wrong person may get hold of their credit card number or other private information.

Because of booming e-commerce and the love affair with the Internet, there is much at stake for credit card companies should these problems or fears get out of hand. As you might expect, companies are working quickly with new technology to stop the problems and calm the fears...

Read the rest of this article by clicking below:
http://www.debtsmart.com/cgi-pl/go/010831_email_news.cgi?5&7428 

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Your Finances
by Terry Rigg

I believe that financially, people fall into one of three categories.

Which category do you fall in?

The funny thing about the three families above is that they could have exactly the same income and family size. This is not to say that special circumstances has nothing to do with it, but on the average most people live above their means.

Family 1 has established a workable budget. They don't pay more than they can afford for housing, transportation, utilities, etc. They also have money set aside for long and short term savings. This short term savings provides two things. First, it makes money available when...

Read the rest of this article by clicking below:
http://www.debtsmart.com/cgi-pl/go/010831_email_news.cgi?6&7428

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HOW TO SUBSCRIBE TO THIS NEWSLETTER

TO SUBSCRIBE to this newsletter click on the below link and complete the subscription form:
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The author(s), Press One Publishing, and DebtSmart.com shall have neither liability nor responsibility to any person or entity with respect to any loss or damage caused, or alleged to be caused, directly or indirectly by the information contained in this email newsletter and/or at the DebtSmart.com web site. The information, methods and techniques described may not work for you and no recommendation is made to follow the same course of action. Every effort has been made verify the accuracy of all content contained herein. However, there may be mistakes; typographical, mathematical or in content. This email newsletter and the DebtSmart.com web site have been created for your entertainment only. You must always seek the proper professional advice before taking any financial or legal action. You have been warned.

Copyright (c) 2001 Press One Publishing. All rights reserved. Please do not reprint, or host on your Web site, without explicit permission. However, if you found this newsletter helpful, we grant you permission, and strongly encourage you, to e-mail it to a business associate or a friend. Thank you.