Is buying repossessed items ethical?

Dear Dave,

Do you see an ethical dilemma involved in buying things like repossessed cars, houses that have been through foreclosure, or even pawnshop items? While these kinds of purchases can be smart and thrifty, I worry sometimes that I’m taking advantage of those who are stuck in a bad financial cycle.

Ryan

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Dear Ryan,

You’ve raised an important question. You sound like a fair and caring person, and I appreciate that. However, I don’t think there’s any kind of ethical issue involved when you buy items where you have nothing to do with their sale, and no control over it. If your intention in any transaction is to harm or take advantage of someone, then what you’re doing is wrong. For example, you shouldn’t loan someone money at 40 percent in hopes that you can take their stuff because they can’t pay! I never make a deal that’s not a win-win situation.

I buy lots of things at the pawnshop. If someone pawns something, and later I can get a bargain, you bet I’ll buy it. As far as a house is concerned, is it worse for the other person to sell the house to you, or to go through foreclosure? With the latter, they’ve already been foreclosed on, so you’re buying it from the bank. You’re not taking advantage of them by doing this.

If someone is in a bad situation, and buying their stuff will help keep things from getting worse, that’s a blessing. In some cases, you’re assisting them in turning their lives around!

Dave

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The scoop on online banks

Dear Dave,

I’m considering opening an online money market account. They’re offering a higher interest rate because they don’t have as much overhead as a traditional bank. Is this legitimate? Is there any more risk in this than at my local bank?

Sean

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Dear Sean,

The fact that it’s an online bank instead of a brick and mortar institution doesn’t really increase the risk. In the end, it’s the integrity of the people involved that matters. You’re probably going to be all right, as long as they have a physical presence somewhere, or they’re insured by the Federal Deposit Insurance Corporation (FDIC).

Don’t take just their word for everything, though. Do your homework. Get on the Internet and gather some information first. This is your money we’re talking about, so be diligent and check them out! Make sure their security measures are complete and up-to-date, and that you’re personally comfortable with the differences between online and in-person banking.

There are some Internet-only banks out there that I wouldn’t give a dime of my money. That’s because they’re not strong banks, though, not because they’re “Net only.”

Dave

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Refi now!

Dear Dave,

I have an 80/20 interest-only, adjustable-rate mortgage. The rate will adjust in seven years. Should I really pay into the 20-percent portion of the loan and knock it out before it adjusts, or refinance with a fixed-rate loan?

Beau

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Dear Beau,

You’ve got one of the worst kinds of mortgages on the planet! If I were you, I’d go ahead and spend the money to refinance now. The current interest numbers on fixed-rate home loans are some of the friendliest we’ve ever had. I mean, it’s a pretty sweet world when you’re talking about financing a property at about 6 percent!

After that, you’ll have no interest-only issues, no pre-payment issues – none of that garbage that can sneak up on you down the road. Do it, Beau. It’s an absolutely fabulous time to refinance a house!

Dave