Wednesday, November 12, 2008

'Til Her Daddy Takes The T-Bird Away

We're in a sermon series called "Insuring Your Financial Future" right now, so I have money management on my mind a lot. I've learned a lot of money lessons over the years. Here's one of them...

When I was young, I managed a small office at a Christian college. We were able to hire "Work Study" students in that office. They qualified for government aid which helped us pay them a decent part-time wage while minimizing the impact on our budget.

One of the girls who worked there I'll call Liz. Liz was a quiet girl with great work ethics. She was a pretty good student who planned a career as a teacher.

Liz was also, I knew, from a difficult family background. She worked hard to be able to attend our college, which wasn't cheap by any means.

As Liz reached her Senior year, she was in a quandary. She needed a way to get back and forth to elementary schools for her training as a student teacher. Public transportation wasn't great in Phoenix in those days. I'm sure it still pales to what some of you have available in big cities in the East. (I love the "T" in Boston!)

The logical answer was for Liz to buy a car. True to form, she made a careful, conservative decision. She found a simple, reliable used car for an excellent price. That introduced her to another problem. Even though she had money for a down payment and had proof of adequate income -- even though she had good references -- she had no credit history. She also had no possibility of backing from her family in another state.

Not sure what to do, Liz came to Cathy and me. We both knew her and were impressed with her. We wanted to help her succeed and we fully believed in her integrity...

So we cosigned for a loan at the local Credit Union.

It took well over a year for this lesson to come home to roost. Liz graduated, got her teaching certificate and moved back to her home state where she immediately found work. We were happy for her and proud of her accomplishment.

Then, one day, out of the blue, we received an official looking envelope from the Credit Union. Opening it, we discovered that Liz hadn't made her car payment in over 60 days. In fact, within just a couple of weeks, the loan would be in default and would immediately reflect on our credit rating! In other words, she had missed two payments, but this was the first time they notified us as cosigners!

In those days our income and expenses were very tight. We weren't in a position just to start paying for Liz's car. But if we didn't, we would take the hit! In fact, it was legally possible that we could pay for the rest of the loan and she could walk away unless we took her to court. Even then we might have received nothing but a huge lesson.

No wonder Solomon wrote so long ago...

1 My child, be careful about giving a guarantee for somebody else’s loan, about promising to pay what someone else owes.
2 You might get trapped by what you say; you might be caught by your own words.
3 My child, if you have done this and are under your neighbor’s control, here is how to get free. Don’t be proud. Go to your neighbor and beg to be free from your promise.
(Proverbs 6:1-3 NCV)

Our story had a happy ending. We contacted Liz. She was deeply embarrassed and sorry. She had a setback because of unforeseen circumstances, but she got back on her payment schedule and paid us back for the payment we had made.

Our nation has entered a season of tight money. The easy credit of our recent past has us reeling. Many people who qualified a short time ago will now have trouble getting loans. No doubt, you will have a "Liz" needing your help.

Can you afford it?


beckiwithani said...

I think you guys are the ones who taught me not to lend money that you can't afford to never get back. I guess this is where you learned that lesson!

You will love our new place when you come and visit in 12 days. A block from the T station!

Sam said...

Whew! When I saw the letter "T", I thought you were going to say you got a T-bird!

Your mom reminded me that we had gone back to the credit union sometime before this "almost-default" and requested our name be taken off the loan. At the time, it was still in good standing, but their answer?