High interest-rates!


#1

what would you do? Here’s my dilemma; I recently purchased a used car and was charged 24.95 % the highest interest rate allowed in my state! At the time of purchase, I had no down payment, nor a trade-in. I would like to refinance my car, but my credit is not very good…any suggestions?


#2

Well, you can talk to any bank about refinancing, but if you have poor credit I would not get to excited about the possibilities. If you default on the loan, they will definitely have something worth less than what they paid for it.

ref


#3

Depending on how much you financed, perhaps you could get a signature loan from a bank and use that to pay off the high interest loan. If that’s not an option for you, I would consider reselling the car as soon as possible. It would be better to take a loss up front before you get in too deep down the road. Then I would go look at new cars. Are you trying to live above your income bracket? Not to get too personal, but I see it every day with customers who bring cars into my shop. They couldn’t afford a new Mercedes or BMW or Infiniti, but an 8 to 10 year old car, is do-able. If you can’t afford it new, you REALLY can’t afford it 10 years old with the used car maintenance and repair costs… There are some pretty good deals on new cars like a basic Toyota Corolla with 0% to 5% finance. The payments on something like that are really pretty cheap.


#4

Call around. If never hurts to try as the rate cannot get any higher. good luck on straighening out your financial future…


#5

If I were to “default” on the loan…that would only make my credit worse, plus I would still have to pay the bank the remainding amount…yes?


#6

what car-dealer is going to sell a person like me a brand new car when I have poor credit???


#7

I don’t think ‘ref’ was suggesting to default, but rather that they may be more willing to refinance if thought you couldn’t handle the expense. Most financial institutions would rather negotiate a lower interset rate than have to deal with a potential default.


#8

Your options are pretty limited. Your best bet is to go into a real bank and throw yourself on their mercy. If the vehicle is fairly high mileage and is more than 6 or 7 years old they will probably not finance this for you at all.

It sounds like you bought a car from one of those “Buy Here, Pay Here” lots. If this is the case you might talk to them about taking the car back. They MAY allow you to walk away from this deal by throwing another payment at them and they MAY not ding your credit report again.
I know a guy who runs one of those “BHPH” lots and he sold, and took back, the same vehicle 3 times in one year; and all from different buyers. He never went after any of those people in court.

If you cannot get out from under the loan they can go after you for any remaining balance. If you default on the car and it becomes a repossession they can sell the car for whatever they can get and then go after you in court for the balance owing. This is called a “deficiency judgement”. If they get that, then they can go after any money in a bank account or your paycheck.
JMHO, but I don’t think the situation will get this far. Just pointing out a “what if”.


#9

Sorry for the bad news but sell the car and take the bus or buy a $200 beater for a while. Mathematically there is virtually no way a normal person can reasonably pay off a 24% loan. Of course it can be done but not by normal people finding themselves in this situation. It is virtual servitude and userous. Why in God’s name would you ever agree to something like this in the first place? If your credit is shot and you can’t deal with normal credit issuers, that’s means that you are relegated to having to pay cash for everything.


#10

Ya got any well off relatives? You really don’t know where help is coming from until you ask for a favor. Never know, one of them might help you pay some of the loan. You might get some luck if you can be a credit union member. The key is how much you owe. Most banks wouldn’t finance the car for more than loan value. It should be easy to get another loan unless the first bank did you too much of a favor.


#11

If you have a credit union where you work they might offer you a better rate/deal.


#12

I’m assuming since it’s financed, you have full coverage insurance, right? …'t would be a shame if something were to “happen” to the car. …


#13

At this point, you may be better off keeping up the payments and the car. If you can get a lower rate of financing at the bank or a credit union, this would be good for you. If not, keeping up the payments may help you re-establish your credit rating.


#14

You are paying 25% because you have a low EQ (Emotional Quotient) and buy things on impulse. Solve this problem and you will just be in another very soon. Next time you want to buy something go away for three days and see if it still seems like a good idea.


#15

First, I feel a need to admonish you for entering into such a bad deal, but that won’t fix your problem, so I will restrain myself.

Now that you are in this position, let’s look at some ideas:

  1. Look into a line of credit from your bank. This can be a home equity line of credit or a debt consolidation line of credit.

  2. See if you can get a family member with good credit to co-sign a loan or a line of credit.

  3. Even if you can’t refinance the whole balance, you might be able to at least refinance part of it using the methods I have mentioned above.

  4. Visit a certified financial planner. You need help and paying $100 for advice that can save you thousands of dollars over the next few years is an investment in your future. Don’t take financial advice from anyone who is not a certified financial planner. This includes insurance salespeople or anyone else who might have a conflict of interest in the advice they give you.

  5. Open a credit card account with a retail store like Sears, Goodyear, or some other outfit that offers its own card. This will help you establish credit. Use the card only for purchases that you can pay off within 30 days since this interest rate will probably be at least 23%.

  6. Once you have established good credit and your score improves, get ONE credit card like a Master Card, Visa, or American Express. Use the card once a month for regular purchases only, like gas or groceries, and pay off the balance within 30 days so you don’t have to pay interest.

  7. Create a budget. This means sitting down and making a list of ALL expenses. You might need to take a week or two to log all of your receipts or carry a list that you can fill out whenever you spend money. You might be surprised to discover where your money goes. Figure out which bills have the highest interest rates and make them a priority over the lower interest bills, unless you have taken loans from friends or family. Loans from friends and family should be paid first even if they are zero interest loans.

  8. Find places in your budget where you can cut expenses. According to the study of economics, food, shelter, and clothing are necessities and everything else is optional. Be brutal when cutting expenses but be practical. Don’t sell your possessions if you will eventually have to replace them again later. Don’t sell your TV but you can cancel or suspend the cable or satellite service. Don’t sell your computer but you can cancel or suspend your internet provider. Cancel or suspend your cell phone service. Cancel your Netflix subscription. If you are in a contract with a service provider and can’t get out of it, tell them you are unemployed and want to temporarily stop your service until you find a job. Sometimes they have programs for folks that are deployed in the military. See if they will let you use this program even if you are not in the military. This can buy you some time to get your finances in order. Don’t sell your car if you need it to get to your job. If you can rely on a bus or a bicycle, you might be better off selling the car. If not, selling the car will only add to your problems. Besides, whoever is financing the car might not let you sell it until it is paid off.

  9. Don’t EVER pay someone who claims they can fix your credit. Only you can fix your credit and any company that claims that they can “clean up” your credit report for a fee is going to rip you off.

In order to get out of this problem, you need to get your finances in order. This isn’t a car problem, it is a financial problem that will require sacrifice in order to be fixed. It is going to require a change in lifestyle.


#16

This is likely not possible for you right now when this situation has gone away will be the time to start saving for your next car, even if only a few dollars per month. You know that you will need another car again one day. If you don’t save ahead for a car, you will never get out of the financial mud. Possibly you might want to assess whether you can afford to keep a car. I know people who are driving golf carts to work in warm weather climates. More communities are removing restrictions on operating these on some public roads.


#17

If you don’t save ahead for a car, you will never get out of the financial mud.

Although saving for a downpayment is a good idea, this statement isn’t necessarily true. I only put $500 down on my $13,000 car and I never owed more than it was worth. If you get a good interest rate and you get a car that holds its value, you can make a good deal. I bought a new 1998 Civic (in February 1999) and got 5.9% financing by having my mother, whose credit is better than mine, co-sign on the loan. If I hadn’t been able to get a co-signer, I would not have been able to get this deal. The payments were manageable ($265/month). I checked the Kelly Bluebook value over the years and the car’s value never went below the balance on the loan. I am glad I didn’t purchase gap insurance! I have continued to drive this car payment-free for four years. Wouldn’t you say that I am “out of the financial mud?”

Saving for a downpayment is a good idea, but it isn’t the only way to make a financially sound purchase.


#18

JRH,
While you make a valid point, the poster made a bad move, period.

Granted, he doesn’t/didn’t have any experience in finances (ie., no credit) and 24.95% interest is just short of a loan shark.

He’s learning a lesson from the school of hard knocks, which hopefully will prepare him better in the future.

For now, he’s in a real bind. About all he can do, (IF he can) is have someone put up collateral to back him up.

Like you did, he’s going to need a co-signer (equipped with a low interest rated loan, to pay off the first one), and heaven help him if he defaults on the payments.


#19

Ignore this illegal, although practical, advice.


#20

Besides being illegal and potentially dangerous, you’d likely need gap insurance for a 24% loan. At that rate, you’ve got to owe more than the car is worth. And since the OP accepted a 24% loan, I’m guessing she didn’t get gap insurance.