Davis Motor Sales banner ad

davesays300 green2KENTUCKY (4/21/13) – This week Dave discusses Making it through medical leave and You lose control with repossession.
 
Dear Dave,
I’ve been on medical leave from my job due to an injury. My doctor recently advised extending the leave another six months, but during this time I wouldn’t be paid. My husband makes $75,000 a year, and we owe $40,000 on our cars. This includes a $30,000 note on one of them. Should we take money out of our 401(k) to make it through the additional time off? - Crystal

Dear Crystal,
Absolutely not! You guys have dug a hole for yourselves, and borrowing from one place to fix another will only make that hole deeper. In cases like this you have to address the core issue. Your income has dropped significantly, so you need to cut your lifestyle to match your new income level.

My advice would be to sell the cars, at least the $30,000 one. There’s no justification for $40,000 worth of vehicles in your garage when you’re living on $75,000. It makes me think you don’t have any savings, either, if you’re talking about raiding your 401(k). Financially speaking, you have no room to breathe right now.

Serious situations call for serious actions. You’ve got to get your lifestyle down to a manageable level until you’re able to work again. And even then, there’s no reason to raise your lifestyle up to your income. Live on less than you make, Crystal. That’s what enables you to save money and be prepared when Murphy comes knocking on your door! - Dave
 
Dear Dave,
I’m having trouble making my auto payment. I owe $20,000, and the car is worth $17,000. Should I allow the bank to repossess it, and could they take a lien against my house if they do? - Jose

Dear Jose,
You bet they could slap a lien on your home. You never want to go through repossession if there’s any way to avoid that scenario. If they repossess, not only does your credit take a huge hit, you also lose control of the price of the car.

After a repo, the lender will sell the car and sue you for the difference. But if you sell the car, you might be able to work out a higher price, leaving you a lesser amount you’d owe for the difference. Chances are if your loan is with General Motors, they won’t work with you on the $3,000 difference. In that situation, you can either negotiate with the bank or go to another bank or credit union and get a small loan for the difference. Just make sure you pay the loan off as quickly as possible.

Keep in mind, too, that even if the car is worth $17,000, it won’t bring that much on the repo lot. More than likely it would sell for about $11,000, leaving you $9,000 in the hole. By giving up control, you’d create a much bigger financial mess. I wouldn’t do that. - Dave

* Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.


Disclaimer: The content supplied by columnists and letters to the Editor on this site does not in any way, shape or form, implied or otherwise, necessarily express or suggest endorsement or support of any of such content, statement, or opinions therein. SurfKY News does not necessarily adhere to or endorse content provided by outside non-staff sources.

© Copyright 2015 SurfKY News Group, Inc. All rights reserved. This material may not be published, broadcast, or rewritten without permission. SurfKY News encourages you to share this story on social media.

In Other News...

Emergency Food, Shelter Funds Available through FEMA

HOPKINS COUNTY, Ky. (3/2/15) — Hopkins County has been awarded federal funds made available through the Department of… Read More

Madisonville Teen Faces Numerous Drug Charges

MADISONVILLE, Ky. (3/2/15) — A Madisonville woman was taken to jail after a Madisonville Police officer made a traffic… Read More

Most Read This Week

March 02, 2015 8556

Madisonville Teen Faces Numerous Drug Charges

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Detention Center
February 25, 2015 7897

Multi-Agency Investigation Nets Large-Scale Meth…

in Top News For All Sites by Trooper Stu Recke
February 24, 2015 7709

Two Charged in Central City Meth Bust

in Local (Muhlenberg) Top News by Trooper Stu Recke
February 22, 2015 7544

Easter Cuties Pageant in Memory of Shanice Bean

in Top News For All Sites Touching Hopkins by Tammy Holloway, SurfKY News
February 25, 2015 6231

New Asian Restaurant Coming to Madisonville

in Local (Hopkins) Top News by Gary Gates, SurfKY News
February 23, 2015 5510

Fire Departments Respond to Wester's Body Shop

in Local (Muhlenberg) Top News by Shawn Freels

Most Read This Month

February 12, 2015

UPDATE: Name of Pennyrile Fatality Officially…

in Top News For All Sites Touching Hopkins by Doreen Dennis, SurfKY News
February 09, 2015

Police Pursue Man after Fight at Taco Bell

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Detention Center

Stories Trending Today

March 02, 2015 8556

Madisonville Teen Faces Numerous Drug Charges

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Detention Center
March 02, 2015 3260

HCSO, MPD Join to Bust Alleged Drug Trafficking…

in Local (Hopkins) Top News by Hopkins County Sheriff's Office
March 03, 2015 3237

Three Arrested during Traffic Stop

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Detention Center
March 02, 2015 2330

Officers Respond to Complaint of Drug Use; Arrest…

in Local (Hopkins) Top News by Hopkins County Sheriff's Office/Hopkins County Detention Center
March 02, 2015 1963

Job Fair Tomorrow in Madisonville

in Hopkins News by Kentucky Career Center
March 02, 2015 1793

UPDATE: Escapee Apprehended

in Top News For All Sites by Stu Recke
March 02, 2015 1681

Madisonville Police Arrest Reports - March 2, 2015

in Hopkins News by Madisonville Police Department
March 02, 2015 1411

Dawson Springs Man Charged Multiple Offenses Plus…

in Hopkins News by Melissa Heflin
March 02, 2015 1390

Locals Flock to Yoga for Unique Wellness Technique

in Local (Hopkins) Top News by Doreen Dennis, SurfKY News
March 02, 2015 1321

Greenville Police Department Reports Released;…

in Local (Muhlenberg) Top News by Wes Miller