How to get out from under a car loan


#1

OK, so I have a friend who is in a tough spot. She has a $15,000 balance on a car she could only sell for around $10,000. Her job is not reliable right now, and she only drives the car about once a month. I’ve run the numbers and if she could get a $5,000, 3 year loan, and sign up for zipcar, she would save over $300 per month.



She’s getting to the point now where its: should I pay the credit card this month, or pay rent?



She says she went to her dealer and tried to see what they could do, with no results.



Does anyone have a good idea about how someone in her position can get a loan? I’ve told her that one option may just be letting the lender repo the car, but she does not want to take the hit to her credit.



Thanks for any help!


#2

Where did she finance? Dealer?

Has she considered refinancing at her local bank/credit union?

She might be able to get a better interest rate there.

Don’t let the car get repo’d. Are you familiar with the phrase “off your wheels and on your heels”? She doesn’t want to be in that situation. Trust me.

Another option is for her to sell the car for $10k, find a used car in the $3k range and pay for it outright with a small loan from the bank. That cuts her debt ALMOST in half.

Hope that helps.


#3

What’s “zipcar” sounds interesting.


#4

zipcar is an urban “rent when you need” it car. like a neighbor you can always borrow a car from, for beer money. Cheaper than a regular rental


#5

Yeah, she looked into that. The best option I could find was something like the online person to person lending sites, but her credit score isn’t good enough to qualify apparently.

Selling the car for 10 and buying one for three still requires finding an extra 5K of financing, since you can’t sell a car that you don’t own.


#6

The credit card can be a bigger problem than the car. Bankruptcy could be the only solution other than help from family. Now would be the best time to get that help before the credit card balance becomes a problem.


#7

Current bankruptcy law was written by the credit card industry it appears. And they took care of themselves.


#8

Sounds like there’s just no good solution, huh?

I mean if you can’t come up with 5K, you have to keep paying monthly until you’ve paid it off. Makes no sense, you’d think the financier would be able to deal, since eventually she’s not going to be able to pay and then they’ll be getting nothing for the car (after they repo it) and she’ll have a credit crisis.

That seems like the best plan but it’s not available to her :frowning:


#9

Well she would have to finance the $15k elsewhere, pay off the dealer or whoever, then sell the car for $10k and then borrow another $3k from the bank. Where does the extra 5k come in?

But if her bank/credit union said no then it doesn’t matter. You may just have to let the car get repo’d if her 'rents can’t help her out.

Any luck with her finding a better/second job? That may be her best bet if letting the car get repo’d isn’t an option. Good luck.


#10

They’re From The Government And They’re Here To Help! The Census Bureau Is Hiring Right Now For The 2010 Census.

In my area they are having trouble getting enough workers. A 28 question test could get her a 4 month job for extra cash. Jobs are indoors and outdoors, pay up to about $20/hour, can have flexible hours, and I was told you could make 5k or 6k from Jan through April or May.


#11

Actually, it makes excellent sense. Unfortunately, it doesn’t help her. It makes sense because the loan company doesn’t want a car that is worth 2/3 of the value owed, plus interest. Why should they deal with someone who is able to pay? If she loses her job that puts her in another catagory, and they might try to work something out.


#12

Believe me that was suggestion #1, 2, 3, 4 and 5 - but she’s not really into working hard…


#13

Your friend should call the financing bank. They would probably rather extend the loan and let your friend skip a couple payments now and make them up later than repo the car and default on the loan. They make more money on the interest and your friend gets to keep her car. I did this once when I was unemployed and American Honda Finance Corp. was happy to do it because I had never missed a payment with them in the past.

If she can manage it, the best thing to do is keep the car until it is worth more than is owed.


#14

I’ll suggest that. Thanks for all the ideas, everyone.


#15

Well I guess I/we’re not too sympathetic then.


#16

Tell me about it :wink:


#17

How about bankruptcy? I know of a guy, a real jerk who claims to be a good Christian, who drives a big BMW, and lives in a big expensive home, uses bankruptcy like it’s his own personal get out of jail card (several times). I hope he gets cancer or better yet, I hope the IRS gets him. But if your friend is honestly in trouble, it’s a way for her to get out of financial trouble and keep her car. She should call a banruptcy attorney if that’s an option.


#18

With the current bankruptcy law you are allowed to keep a car whose value is $5000.00 or less,anything more it must be listed as a asset,but she does not own the car,could she file for bankruptcy,free herself from the loan and keep a car with a value of $10,000?


#19

You reap what you sew. Just because she’s “not really into working hard” doesn’t mean she can’t.


#20

She has a $15,000 balance on a car she could only sell for around $10,000. … and if she could get a $5,000, 3 year loan, and sign up for zipcar, she would save over $300 per month.

The PER MONTH thinking is what gets people into these kind of messes. Think if terms of what she will owe and how to reduce that amount first and foremost. Then figure out how she can afford to pay it off as fast as possible.