DEAR HARRY: My mother is 84, and still in pretty good mental shape. She had to buy a new refrigerator when her old one died. However, it would not fit unless she removed or replaced one of her kitchen cabinets. The kicker is that the installer of the new cabinet persuaded her to go all the way and redo the whole place. The price shot up from $120 to install the new cabinet to $1,970 for the new kitchen. Since she has no mortgage, she opted to go for a loan that would be paid off in three years. The payments for her $1,700 loan are $64 a month. She thinks that's reasonable. I don't. It looks like she was suckered in twice - once for the whole kitchen and once for the loan. I checked out the price for the kitchen, and it's a fair price. But the loan looks high. She'll be paying $2,304 for a $1,700 loan. Am I on track here? How can I help her?
WHAT HARRY SAYS: You are right on the ball. That interest rate is way off the scale at 21 percent! Contact her bank to inquire about a home-equity loan. Rates today are in the area of 4 percent. At that rate, her payments would be $50 a month. That totals to $1,800; a pretty big savings from $2,304. Be sure to check out the prepayment terms on the present loan to make sure she doesn't get hit again by some exorbitant early-payoff charge.