HELP ME CLARK!
From HLN's Money Expert Clark Howard

Kathy:

I have recently inherited enough money to pay off my mortgage ($130,000) and still have a lot left over ($100,000.) I also have $12,000 in savings for emergencies. I am single, 62 years old and give 10% to charity each year. Should I pay off my mortgage?

Clark:

Generally, the answer to that question depends on what your interest rate is. If the interest rate on your mortgage is 5.5% or higher, then it would be a no-brainer to pay that mortgage off. If your mortgage interest rate is below 4.5%, it's really a lifestyle choice if you want to pay off the mortgage just so you have the peace of mind that you no longer have that obligation. But I'll tell you, if you have a mortgage rate that is 4.875% or less, forget the piece of mind. Keep the money and pay the mortgage off as agreed for the entire length of the loan. So you've got a three-parter here. One, your interest rate is higher than 5.5%, pay it off. Your interest rate is between 5% and 5.5%, it's a tossup. If your interest rate is below 5%, no way you should rush to pay it off.

Clark Behind the Headlines
From HLN's Money Expert Clark Howard

There are changes coming to the car market that are so exciting. The cost of reliable transportation has come down and down and down. And we are now in an era where you can buy new cars for as cheap as $10,000!

Manufacturers will often release versions of their lowest price point models – some as low as $8,000 or $9,000 – and many of them come equipped with just about anything the typical buyer would want: cruise control, automatic windows, automatic transmission, etc. Wait, it gets better!

Nissan, one of the world’s largest automakers, is putting out a car in Asia in about two years that will cost around $2,000 bucks!

Now why in the world would you care about a car that’s being sold in Asia? Well, I want you to think historically. In electronics, the trends often emerge from Japan. The Japanese market is a leading indicator of what’s coming to the United States and to Western Europe.

Now we’re not going to have $2,000 or $3,000 cars in the United States anytime soon because of our safety requirements. The cars have to be designed to meet our safety and emission rules and that’ll pump up the price to around $6,000 brand new, but that’s still a heck of a deal!

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This week’s question comes from Dan and Heather Sostrom of Gainesville, Florida.

Clark:
Wow you’ve got a lot of mouths to feed in that household, now another one on the way. Three children that you’re going to have to raise and pay for college for.

But the thing is, do you know what? You paid for your own college you said that set you back. But the truth is there are so many ways to pay for college, but you know what? There’s only one way to pay for your own retirement.

So you love your children, you want the best for the them but key thing, your primary focus and goal should be to beef up your savings for retirement. You need to contribute more each and every month to that and then if there’s money left over, put it toward your kids’ college in a prepaid plan or the 529 plan.

This conflict I’ve just talked about, I hear this over and over and over again. And when I talk with older couples whose kids are now grown and then I ask 'What did you save for retirement?' They kind of can’t look at me because they’ve taken all the money and put it toward their kids’ college.

Remember what I just said. Your primary goal with your long term savings is not your kids’ college. There’s work, there’s loans, there’s grants, there’s scholarships but for retirement you’ve got one thing and that’s you.

Help Me Clark!
From HLN's Money Expert Clark Howard

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Jerry:
I recently received a medical bill from a doctor I used in 2007. His office said an audit turned up a lab bill that was not filed and they want me to pay it.

My insurance company says it's beyond their time limit for doctors filing claims. One person at the insurance company said not to pay it if the doctor says I'm responsible. However, I worry about my credit score if I do not pay it. Any suggestions?

Clark:
You are so right to worry about your credit score and in this case what is a reasonable amount for you to pay the doctor is what your insurance would have left as your co-pay portion.

If the doctor failed to do a timely claim it is not reasonable to hold you liable for the full amount of the lab bill when it was the doctor's office that didn't do their part. So normally with lab work there would be a portion of it that would come out of your pocket; offer them that amount of money.

If they don't want to play you send them a letter by certified mail that their failure to bill you in a timely fashion has caused you harm because it is no longer within the window that you can file with insurance and that you have made an offer to them and that if they at any time attempt to put this on your credit report, that you are prepared to sue them under the Fair Credit Reporting Act.

HLN Money Expert Clark Howard.

Help Me Clark!
From HLN's Money Expert Clark Howard

JAMES:
Two years ago, my mom charged about $11,000 dollars to my credit card and now they're coming after me. I am 22 and just graduated from college, and many employers look at my credit as a negative towards hiring me. The debt collectors call me and I have tried offering a settlement and they will not accept it even after I have explained the situation to them. What should I do? I cannot afford to pay them anything.

CLARK:
Well what a sad thing that your mom betrayed your trust and charged to your credit card. I get this question a lot where a family member or a friend abuses your credit card and you're left holding the bag.

Normally you would have to fill out an affidavit where you swear that you did not make the charges and you say that they were made by your mom and if you do that at the time that the charges have taken place or the time you knew the charges had taken place you normally are not liable for those charges.

You've let this go on and it doesn't sound at all like you want to put your mom in to legal jeopardy so it's going to be up to you to try to make a deal. You have two issues. One is the affect on your credit which for seven years the unpaid debt harms you on your credit report. If you reach a deal and the debt no longer exists on your report the harm to you lessens enormously and with time essentially disappears so the most important thing is to try to cut a deal. And the key number for you is you're two years out from this, once you hit statute of limitations in your state, which means the amount of time that somebody could sue you against a debt you have far more negotiating power to negotiate a settlement for a much smaller amount than the 11,000.

Likely once you go outside of statute of limitations you should be able to settle the debt for 1,000 or so dollars.

If you go and do a Google or Bing search and put in your state and put statute of limitations on debt as the search, you'll see. And that varies by state from either 3 or 4 years on a credit card debt. Some states it will be longer than that.

HLN Money Expert Clark Howard.

Clark Behind The Headlines
From HLN's Money Expert Clark Howard

“Short sale” is a term that no one had heard of 18 months ago. And, even today, it’s very misunderstood.

A short sale is where I own a home, and  I owe more on it than what it’s worth.  I need to get out and I don’t want to be foreclosed on.  So I ask my lender if I can market the house as a short sale, meaning that the price of the home is marked to market. The bank then takes a hit on the loss between what the mortgage is and what the market is today.

Now, are banks running charities?  No way!  The reason why a bank would do a short sale is that it’s much cheaper for them than a foreclosure.  The costs of foreclosures are much greater for the bank because, ultimately, they get less than what they’d get on a short sale, and they end up with enormous costs going through the foreclosure process and the aftermath.  So it sounds like it would be a logical thing to do in a marketplace where people who bought at peak with 100% financing are now so far upside down.

What has changed is the federal government is now subsidizing the banks to allow short sales to go through. The feds are eating some of the losses as an incentive to try to get the banks to do something that’s better for them anyway from a business stand point, which is to cut a deal with people short of foreclosure.  For the seller, it’s a deal because you get out with the shirt still on your back and you didn’t suffer foreclosure.  Your credit score does suffer in a short sale but not as much as it would with a foreclosure.  Quite often, foreclosures lead to bankruptcies, which devastate your credit standing.

So the short sale thing is starting to flip.  It doesn’t mean that every lender has it together.  The biggest lenders have set up the equivalent of war rooms with specialists whose job it is to process these.  Some of the big lenders now take short sale request electronically rather than give that phrase we kept hearing: “Oh, the paperwork is lost”.  So as someone who has long derided short sales, I want to tell you they’re back in the game if you’re looking for a distressed piece of real estate.

HLN Money Expert Clark Howard.

HELP ME CLARK!
From HLN's Money Expert Clark Howard

KIM:
I have student loans, a Stafford subsidized and Stafford unsubsidized, that were consolidated to lock in a low interest rate. I have heard that after either working for the government or in law enforcement for 10 years you can ask to have your loans forgiven. I work for my state's government and am considered law enforcement. It will be 10 years in November. My loans are current. In fact I pay more than the minimum payment very month. Can I ask for my student loans to be forgiven if they have been consolidated?

CLARK:
Okay, here's the story. Under the income based repayment plan you are eligible for forgiveness of the remainder of your student loans after 10 years of payments if you're working for a non-profit or for government, or 25 years if you work in the traditional private sector. But you have to go in to the income based repayment plan first for the clock to start ticking. Believe it or not the years you've already been paying don't count toward the 10 years so get yourself converted to income based repayment and get that clock running.

HLN Money Expert Clark Howard.

HELP ME CLARK!
From HLN's Money Expert Clark Howard

NATASHA:
My husband is 50 years old and a smoker. We are looking to increase our life insurance to $300,000 plus. Should we get term life insurance or whole life insurance?

CLARK:
Term life insurance is almost always my choice for someone, although there can be rare circumstances where another type of insurance would be the right one.

With term insurance you can buy level term that will cover pretty much the rest of a working lifetime, a 15-20 year term is probably appropriate. As a smoker, the rates will be surcharged and you'll pay quite a bit more than you would otherwise, although some companies discriminate against smokers more than others which is why it's really important to shop multiple companies.

Level term is a very simple product. You pay the same premium through the 15 or 20 years and all it does is pay if you die.

Money Coach with HLN’s Money Expert Clark Howard

Having trouble managing money? Do your money goals seem impossible? Clark Howard wants to help you!

We’re looking for individuals or families who are willing to be profiled on HLN. Those chosen will get money advice and information from Clark Howard. This week’s question comes from William Hickey of Arlington, Virginia.

HELP ME CLARK!
From HLN's Money Expert Clark Howard

RONALD:

I had some floors put down in my home for about $7,000. From the beginning, I have had nothing but problems. They sent out a "floor doctor" at their expense, who stated that the floors were installed incorrectly. They then offered to sell me a new floor at cost and the installer would install it for "free." I consulted an attorney who wants $7,500 to begin any action. I wrote my senator who sent it to my state representative who won't get involved. Where do I turn now?

CLARK:

You have to turn to yourself. In a situation like that where you feel that they have failed to deliver, you have a report from an expert that says they failed to deliver, that is made to order for you being your own lawyer, or the equivalent of a lawyer, representing yourself in small claims court.

Now, the limits on what you can do in small claims court vary from state to state. There's a great guide at nolo.com that will walk you through what the rules and requirements and limits are in your state.