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I recently was offered the opportunity by my mortgage company to pay half of my monthly mortgage payment every two weeks. This payment process allows the bank to have my money two weeks earlier, and apparently builds my equity quicker and decreases the life of my loan. I also heard by some financial expert on TV (sorry, I forgot his name....) that it is wise to pay your credit card bill in the same fashion; half of your normal monthly payment would be made every other week.

If this is wise, would you please explain, in simple terms as you have done in your web site, how this would benefit the borrower. I would like to explore if this is an option I should take advantage of.


Basically, the reason you benefit by paying your loan off every two weeks instead of once a month is because you are effectively making 13 monthly payments each year (26 bi-weekly payments x 1/2 payment each = 13 payments) instead of 12. By doing so, you pay off your loan quicker. Another benefit of paying your debt on a bi-weekly basis instead of once a month is that it can provide discipline to your budget, make for smaller payments and, if you get paid bi-weekly (instead of twice a month), it can correspond to your earnings.

A con to your lender's "offer" is that they likely charge a monthly fee to use the bi-weekly program. If you don't have a prepayment penalty on your loan you could get the same effect by making an extra monthly payment once each year (or more often to pay it off quickly).

Also, if you are weighing this option for both your credit card and your mortgage, you should almost always focus on paying down your credit card first before making extra payments to your mortgage. Your mortgage is tax deductible and likely at a lower interest rate.


There is a company on my credit report that has a zero balance and is still open, however I don't recognize the name and I want to close the account.

Where can I start to find out who this company is and get that account closed?


It's not uncommon at all to have unrecognized names on your credit report. As long as the balance is zero, it shouldn't affect your credit (in fact, it could give you a better score by making your credit look more established). With that said, I understand why you want them to update it with a "closed" status. To do so, you'll have to find out who the company is and then write them a letter asking them to report the account as closed to the credit reporting agency. It is sometimes difficult to determine where the account came from, as the name on your credit report doesn't always correspond to the company that gave you the credit in the first place. Here are some tips I would use to track down the company:

Look at the date the account was opened and try to think back to who gave you credit at that time

Take the name on the credit report and do a search on for that name and variations of that name. See if any of the results look familiar to you.

It could be an old credit card, a department store card, a bank account, a refinanced student loan, a car loan, a mortgage or numerous other types.

If you can't determine who the creditor is, write the credit reporting agencies that are reporting the account and ask them to either identify the creditor or remove them from your report.


I am under the age of 59 1/2, but I need to take money out of my 401(K). I will not be able to pay it back, so it will not be a loan. I know if I do this I will have a 10% penalty. Are there any other options, besides taking the money out of the 401? Can I rollover some of it into an IRA and take a distribution from there?


My knowledge of the tax laws is not nearly as good as a tax advisor, so I'd suggest that you contact your tax advisor or accountant before you make any final decision. With that said, there are several ways to tap into your account early without a penalty. They include disability, buying a home for the first time and paying medical expenses that are more than 7.5 percent of your adjusted gross income. If none of these apply, there is one other way that I know of to withdraw money, but it's kind of complicated. You could "retire early" and take equal distributions from your 401K each year. The amount you can withdraw each year is dictated by your age. For example, if you are 50 years old and your life expectancy is 80 years old, then you could take the money out in 30 equal payments. When you hit 59 1/2 you are free to use the money with no penalty. I'm not sure if that would help you, but if you want to learn more about it, visit the IRS website.


I have a 401k and just paid $20k on my mortgage to reduce you think this is wise as my interest rate is 5.75%.i now have $125k left on the loan or would it have been better to invest the money in stocks/bonds.I have 23k left and have no ideal how to invest it.I want to take a slight risk but the market is so bad now I think it may be better to put the money in a 6% municipal bond. Would it be better to just buy a good stock like Wal-Mart or buy a diversified mutual fund index maybe?


The interest rate on your mortgage is very low indeed. It probably doesn't make sense to pay it down faster than you need to. In making your investment decision, here are some points to consider, but remember, the decision is yours:

The interest on your mortgage is tax deductible so the 5.75% rate is really closer to 3.5% (assuming a 40% tax rate) after taxes.

In making decisions as to where to invest your money you need to take into account your risk profile. If you have a long time before you need to spend the money (or before retirement), you should take a higher level of risk (stocks, mutual funds, bonds). If you are very uncomfortable losing any amount of money, you should take a low level of risk (bonds, money market or even paying the mortgage down)

If you can afford the risk, stocks are the best return over the long run.

The fact that the market has done horribly for the past 2 1/2 years does not mean that it will continue to under perform. In fact, history suggests that the market will likely outperform over the next five years as a recovery has already begun.

If you are going to invest in stocks, I would suggest mutual funds, as they diversify the risk that any one single stock can have on your portfolio. You can research mutual funds easily online through websites like or other sites.

You could invest half the money in bonds and half in stocks, or any combination thereof, to meet your risk level. You could also buy a few shares of your favorite stock and add it to your portfolio.

Don't do anything that you're not comfortable with.


My husband and I are inheriting a substantial amount of money (enough to put 20% down on an averaged priced house ($190,000.00) and still have approx.1/2 left over. We are unsure if buying a house is really going to benefit us financially. Right now we are only paying $575.00 for a two-bedroom apartment in a somewhat good area. Would it be better to just keep the money in the "cash-management" account and spend some of the interest (if we were to choose to spend any of it) rather than spend 1/2 on a house? I am the bread winner of the family and earn around $41,000 a year. My husband is on social security disability and a stay-at-home dad for our son who is My husband is a bit nervous about making such a big purchase and having only 1/2 of the inheritance left over for security. He is afraid that house payments along with utilities and anything extra will just eat up all the inheritance money. Would keeping all the money in the cash-management account be a better choice in the long-run rather than taking and spending half on a house purchase?

Thanks for any advice you can give....


I can only give you suggestions as to what to do, but from your email it sounds like you are already leaning toward saving the money rather than spending it on a house. Here are some points to consider, but the decision is ultimately yours:

It sounds like you are comfortable where you live and will likely be able to save more money by not buying a house (paying $575 for rent is much cheaper than paying a mortgage and all the costs that go with buying a house)

Buying a house has lots of hidden costs including closing costs, new furniture, appliances, blinds, landscaping, utilities, etc.

You can always change your mind later and buy a house

On the other hand, will leaving your money in a cash management account create much interest income? Depending on the house that you purchase, you may acquire more wealth over the long run if the house grows in value faster than the money in your cash management account grows.

Rather than leaving all of your money in a cash account, you can diversify it into other types of investments. Also, investing in real estate is a diversifying investment in itself.

Also, be careful before you spend the money you inherit. You may have to pay more taxes on it than you anticipate. You may check with your accountant to learn more about this.

These are all things to consider and neither decision you make will be the wrong one.


I am coming up to my graduation day after three years at university. Like most students I need to pay off my student loan. This is not a problem, what concerns me at the moment is my overdraft facility with Barclays bank.

On the day of my graduation my account automatically turns from a student account to a graduate account. This means the interest on my overdraft goes from 8.9% to 15%. With the graduate account comes the option of turning the overdraft into a graduate loan ( at around 9% interest). Would it be advisable for me to take a loan from another company at a lower interest rate, or does the graduate package offered by Barclays really cater specifically to the needs of new professional people.

Thank you for your time and consideration.


9% is not a terrible rate for a loan to someone who's credit is not yet established. Before accepting it, you may want to check into some other sources to see if you can get a more favorable rate. If you can't, it probably makes sense to convert the overdraft into a graduate loan.

Some tips on how to get better loan rates include:

If you have a house or other real assets to use as collateral you can get a better rate.

Sometimes by getting a co-signer for your loan (for example, your parents) you can get more favorable rates

Also, don't just try banks to get a loan. You should also check out other lending companies.


I do not know if you can answer a question for me but if you can that would be great. I have a carp payment of $389 per month for the next 3 1/2 yrs at 11% interest. I have a line of credit loan with payment of $300 per month with balance of $14,200 at 18% interest.

My credit cards are as follows:

Visa $6,400 balance 12% $180 minimum payment

Visa $6,400 8% $135

Visa $5,200 16% $100

Discover $7,150 19% $150

Store $650.00 18% $25

Store $850.00 18% $35

Mortgage. payment including Home Owners Fee per month is $875.00

My salary is $34,200 per year.

I will be receiving $18,000.00 sometime in June thanks to an inheritance.

My question is what bills should I pay off I am having a hard time trying to decide because I am financially strained and I know I need to get rid of some of my debts. Plus have some money left over. I was thinking of paying of my car, but I am not sure if that is a good idea, then I decided to use the money to pay of some of my credit cards.

The point is that I would like to pay down on my debts, and be able to save money monthly. I have a 401k at my job at this time.

Please help I do not know what to pay of first to help me in the long run.


It's difficult to tell you exactly how to manage your debt, but I'll give you some suggestions (see below). If you need more information you might want to contact a debt specialist service. I have some links on my site that point to debt consolidation, loan companies and credit companies.


Don't do anything with your mortgage. All my calculations below exclude your mortgage.

You currently have $54,000 in debt (excluding mortgage), $1314 in minimum payments, and are paying an average interest rate of about 14.3%

I suggest paying down the highest interest rate debt. With the $18,000 inheritance, I would pay off the two store cards at 18% ($650 and $850). Then I would pay down the 19% Discover card. After that, I would pay the remaining $9300 toward your LOC.

By doing this, you will reduce your minimum monthly payment from $1314 to about $900. You will also have lowered your interest rate from 14.3% to about 12.3%.

You should actively try to reduce the interest rates you're paying. Do this by refinancing your LOC (but not if your rate is much over 9-10%) or by finding enough low interest credit cards to transfer the rest of your balances to. If you have bad credit problems, this will be difficult and I would suggest trying to rebuild your credit so that you can steadily reduce your interest rates over time (until you are able to pay off your debt). Remember, the minimum monthly payments that you make to a credit card are really only paying for the interest, so to pay them off you need to pay more than the minimum.

If you feel too overwhelmed by your debt, you should discuss your options with a debt consolidation company or some other debt management program. In some cases they can help you renegotiate your debt and even expel some of it. Keep in mind that if you have good credit that some of these debt programs could hurt it.

I hope this helps, and I hope you are able to get on top of these debt payments. Don't give up!

p.s. I've attached a copy of a simplified debt analysis spreadsheet that I created for you that may help you understand the impact of your debt payment decisions.


Hi, I want to get some financial advice. If we have extra cash available is it smarter to pay off our mortgage which is currently at 6%, invest money in stocks and mutual funds, or purchase a new home? We have no other debt other than our mortgage and currently make a six figure salary. But a new home will stretch us on a monthly basis with the increased costs overall of a larger house.


The best financial advice for you is to go with what feels right to you. Based on your email, I would recommend either investing the money or using it to purchase a house. Here are my reasons:

A 6% rate (I'm assuming it's a fixed rate) is a great rate. I would predict that any money you invested in stocks, mutual funds or a house would return much more than the 6% over the next several (5+) years.

When weighing the home vs stocks/funds: By buying a larger house, you are likely to spend a lot of the money upgrading furniture, paying closing costs and on other miscellaneous costs that won't return much value to you in the future. That's fine if the reward of having a larger house is worth it to you. But if you really want to get ahead in the long-run, investing the money in stocks or mutual funds might offer more reward.

You mentioned that a new home would "stretch you" on a monthly basis. By investing the money, you will not be stretched financially and you will always have the option of buying the larger home with the money that you invested.


I am a 37 yr old Dad, Mr. Mom, Landlord, My wife is a school nurse, Our twin girls are 8.  We own 7 buildings, 6 of which are rentals that cashflow about $40k per year.  My wife grosses $31K.

Five out of the seven properties are paid for. We have no debt other than property debt, see below:

$161k at prime + 3/4 = 4.75%

$33K at Prime - .5% = 3.5% equity line, interest only, 90K still available in credit.

$101K at 0%, yes 0%, these are mortgages that I have paid off with credit card offers, I go from card to card as needed and back up any possible problems with the equity line. I realize this won't last for ever but am stretching it out as long as possible. Most of the current 0% offers last till next spring/summer of 04.

We are extremely disciplined, follow a budget and record all spending with Quicken. Our budget including vacations is about $32K per year. For Savings:

We have a 401K at $88k that is from my old job, I no longer can add to this but can move funds around, eventually, I could roll this into an IRA.  We have $73K at 2% in a savings, this is available at all times. I currently add $1600 per month to this.

Our Tax situation is good, I project that the 2003 Schedule E to show a profit of $18K, with an AGI of $44k & taxable income of $22k. When I combine state with federal rates, I figure that 22% of all interest deducted is money saved in tax but inversely 22% of all interest saved (not sheltered) is money I pay in tax.

Introduction to My Question: Knowing that my variable rate loans are eventually going to go up, I have a tendency to want to pay them down first with my available savings and cash flow but I have been holding out on this plan because of the monies at 0% as well as the fact that I am at such low rates and also because I have been wondering if I can invest at a much higher rate than my highest loan of 4.75%( keeping in mind it could be 6.5% in a couple of years).

Question: Do I start to pay down all debt ($295k) now and possibly complete the process within 8 years or do I invest the $73K and $1600/month for a better yield keeping in mind that my mortgage rates could climb?


I don't think you really need any help. It sounds like you know exactly what the consequences are of either of your choices. I've run into the same question lately and what I did was invest the money and use the monthly payments to pay down the credit card part of the debt. I chose to pay down the credit card portion (rather than the higher rate LOC), even though it was at the lowest interest rate, because the offers will soon expire, because it has the least tax benefit, and because it was hurting my credit score (for buying more properties).

In your case, it probably makes sense to pay down some of the debt and invest some of the money. If the market continues to go up, then use future money to pay down debt. If the market goes down, use future money to invest at lower prices.


I am 42 and my husband is 43. We both have jobs with pensions. We have good amount of savings in 401k and Roths. We have at least 80% equity in our home. We have a large monthly mortgage payment. I have an old job that will buy my pension out. Should I take it and pay off my mortgage that is paid off in two years. Then we can save that monthly money and put it toward colleges and high school.


Your decision may be kind of tough, as there are several factors complicating it. I can't tell you what the right decision is for you, but here are the factors that you should consider in making your decision:

First, is your ex-company making you a good offer? In other words, how much money are they offering to buy your pension out? To compute this, look at the value of all of the future payments that you would receive if you kept the pension, and then discount them to today's value. For example, if you are 42, your pension starts at age 60, and then lasts for 30 years at $100 per month, it should be worth about $7,500 today. This assumes a cost of capital of 5%. To find out about how much your pension should be worth (assuming most of these assumptions are decent estimates), multiply each $100 in monthly pension by about 75 times. So if your pension was for $200 per month, a lump sum payment today would be worth about $15,000 ($200 x 75). This rate is very sensitive to the cost of capital assumption, which is kind of a mix of the interest rate and the inflation rate. If the cost of capital moves to 4%, then the 75 multiplier would move to 100. In other words, the lower the cost of capital, the more the pension is worth today. This is probably too complicated to get into in this email, but you should be comfortable that the offer your company is extending to you is a reasonable one. If it involves a large percentage of your savings, then you'll probably want to talk to an advisor of some sort (an accountant could probably help you too) to make sure it is a reasonable offer.

Second, the tax consequences. If you sell your pension today, you will have to pay taxes on the entire amount this year, and it will be taxed at your ordinary income tax rate. Also, your ordinary income tax rate will be higher because you will have earned more (when you include the pension payoff).

Third, the mortgage payoff. By paying off your mortgage, you will lose some of your income tax deductions. Specifically, the interest portion of your mortgage payments will go away and you won't have the tax benefit. If you only have two years left on your mortgage, this effect won't really matter too much, since your interest payments are probably a low percent of your mortgage.

Finally, some positives about selling the pension:

- You will have the money and can manage it as you choose. Assuming you can invest the money at a rate higher than the cost of capital that your pension was earning, it will be to your benefit.

- You don't have to wait for the pension money. A typical pension is paid out for an indefinite period of time. By getting the money now, you will not have to gamble with how long you will receive payments. For example, if your pension starts at 60 and you pass away at 65, you may only receive five years of value. Check with the pension to see if this is a factor, as some pensions pass on to heirs, but most don't.

- Selling the pension and paying all of your debt means that each paycheck you receive can now be invested instead of used for paying down debt. For many people, they have more motivation to save than to pay down debt, so it may make it easier for you to save money going forward. However, be careful, if you are not a good saver, you may be likely to spend the extra take home pay instead of saving or investing it.

I'm sure there's more to consider than these, but this should be a good starting point for you to make a decision.


I am in what I would consider to be a unique situation for someone 33 years old. The house I own is paid for, I have no mortgage and I am selling this house. What I would like to do is use the money from this sale to pay off my other bills, i.e. credit, cars, motorcycles and then roll the rest of the money into a new home. What I wish to accomplish is to have only a single small mortgage payment. I expect to receive somewhere in the area of $120K to $150K for my current residence. My bills total about $61K. I have tried to get a home equity loan and also a bill consolidation loan, but it seems no-one will loan me money because I currently do not have a mortgage, even though I have spotless credit. How much, if any, of this money from the sale of my house is taxable and if it is taxable, how can I accomplish what I hope to accomplish without losing a substantial portion of my sale?


I find it hard to believe that you can't borrow money from your house. In fact, if your credit is good and you are the sole owner, I don't know of a single lender that wouldn't lend you at least 75% of the value. Anyway, if you're planning to sell the house, here are some rules of thumb to help you anticipate what your costs will be:

When you sell your home, you will have to pay taxes on the full sales price ($120k - $150k) less your cost basis. If your cost basis is zero (if someone gifted you the house) then the tax would be on the full selling price. Otherwise, calculate the taxable amount by subtracting the price you paid for the house from the sale price. This is somewhat simplified, but should be a good estimate of what is taxable.

The GOOD NEWS is that, if you've lived in the home for at least 2 of the last 5 years, there will be no capital gains tax. That means that the only cost to sell the house will be relating to the sale. These costs typically amount to about 8-10% of the homes value and include realtor fees (around 6%), title insurance, and other closing costs.

Assuming you've lived there for 2 years, you should net $50k - $75k after paying off your $61k in debt. This should be more than enough to use as a down payment on another home. If you have to pay taxes, the amount you'll keep will likely slip to $25k - $45k, which might make it worth it to stay in the home until you reach 2 years.


My husband is retiring next year (age 55). We owe approximately $40,000 or less on our home. We plan on selling our house in Texas and move to Michigan, and we want to be debt free when he retires in August 2004. Our home is worth at least $150,000. Should we refinance now and pay off all our debts or wait when we sell the house next year to pay off our debts of approximately $30,000.


If you are planning to sell your home in a year, it probably doesn't make sense to refinance now. The cost to refinance (appraisal, origination fee, lawyer and title fees, etc) will probably cost as much as the interest you'd save by just holding the loan and the $30,000 in debt until you sell the house.

However, if you're interest rate on the debt is significantly higher than the current mortgage interest rate you'd be able to refinance at (today it's 4% for a variable rate or 6.25% for a fixed rate), then you may want to consider refinancing the full $70,000 in debt ($40k mortgage plus $30k other debt). That would leave you with about $80,000 in equity in your home when you sell next year. Every 1% reducting in interest on $30,000 is $300 in annual savings (or $25 per month). Another consideration is whether or not you'd get a lower interest rate on the refinance loan than your current mortgage rate.


What should I do? I currently owe $48,000 on a 30 year home loan at 10% I bought the duplex in 1989.

Should I refinance, get a home equity loan, a line of credit? My payments have not always been on time and at times have fallen behind. I would like to buy more property.


My advice is to definitely refinance the loan (10% is ludicrous). And if you want to buy more property, don't ever fall behind on your payments (no matter what the cost). You may also want to take out money from your refinance to serve as a down payment on the next property you buy (you get better rates when you put down more money).


My husband and I are refinancing our mortgage of 7.25% and a home equity load of 9.5% into a fixed 30 year mortgage. We do have equity in our home but would like to lower our payments so we can save to pay off credit card debt. We have lots of debt and our credit is better but we have missed a few credit card payments six months or so ago.

A lender has offered us a 30 year load to cover both loans today fixed at 7.5% matching our current mortgage payment. Seems good, however, I was advised that if we take out a loan on the equity of our home and the appraisal is above the cost of the first mortgage, we would be making money with the loan and we would be taxed on the difference. Is this true? Does the sound remotely possible?


To answer your question, and assuming that you file your taxes in the United States, there is NO WAY that you will be taxed on taking out a new loan. In fact, to the contrary, the interest expense on the new loan should be tax deductible and actually lower your taxes (since the credit card interest you're paying is not tax deductible.)


I have two credit card bills (totaling about $16k). I have just received some money that would be able to wipe out the balances, but only leave me about $10k in my bank. One of the loans is a 0% on the balance until paid in full. Here's my question... I go crazy thinking that I owe debt (especially cc debt). Should I bite the bullet and pay them all off? Since they are 0% pay large chunks of them at a time until paid in full.? This decision is killing me and I don't know what to do! Please help. Thanks!


I recommend paying off your credit cards with the money you receive. Even if they are at 0% for a limited time (nothing is 0% forever, unless the minimum payments are really high), they will cost you much more if you don't pay them off before that time expires. Also, you mention that you "go crazy" thinking about credit card debt. That's the best reason of all to pay off the debt. And you'll probably sleep much better knowing that it's paid off. Just think of the cost that that kind of stress causes!

And even though it will leave you with "only $10k" in your account, you can use the money you would have spent paying the debt to invest or save in the future.


I would like to ask a question. I own a 2 family home. The rent we take in for our rental property pays the whole mortgage each month. Between my husband any myself we make about $70,000 per year. We have $98,000 left to pay on a 15 year mortgage and our house is appraised at $230,00. Although we are comfortable living in a 2 family we would like to own our own home but keep the two family for an investment for the future. The investment property is old but we recently put on a new roof and have installed all new replacement windows. The furnances will probably need to be replaced soon and some cosmetics need to be done in the part we occupy. We are thinking of taking a home equity line of credit to do some repairs and updates to the property but are a little weary of doing this. Would taking a line of equity be the correct thing to do? And what is your advice on how to go about buying a second home but keep this investment property?


Your question is complicated but I hope I can still help. The first question you ask is whether or not taking out a line of credit to fix up your property is the right thing to do. This is hard to answer, but if you think the improvements will increase or ensure future rental payments, then it's probably a good idea to fix up the place with funding from a line of credit.

Your second question, about how to buy another home and keep the current property as an investment property, is easy to answer. If the investment property pays for itself then you shouldn't have a problem getting a loan to buy another home. And if you need to, you could use money from taking out a line of credit on the investment property as a down payment on your new place (but don't tell your lender).


My 89 yr. old mother-in-law has two CDs about to come due. She's thinking of rolling them over, each is about $22,000. She is on a limited income, a small pension plus a monthly income from a reverse mortgage.

The reverse mortgage income will end soon as she is moving into an adult living facility on her doctor's advice. She has enough money to keep her in this facility for about four years and after that her family has to start paying her rent and other expenses. Since her health is beginning to fail, but not rapidly, I've suggested that she keep all of her assets as liquid as possible in the event she needs access to funds in the event of an emergency, especially a medical one.

What would you advise her to do with her CDs? Roll both over, roll one over or don't roll any of them over and stay liquid, or anything else?


I agree with your opinion that your mother-in-law should keep her money in a liquid account. With that said, CDs are pretty liquid accounts. You can remove your money before they mature with only a small penalty. And you can also buy CDs that mature in a very short period (months, not years).

Also, you mentioned that she has a reverse mortgage. If she is moving into an adult living facility she can likely sell her home and get the remaining equity.

I don't know enough of the situation to make the decision for you, but I would recommend estimating her yearly expenses (living, medical, etc) and then try keeping out at least that much in cash at any given time.