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fynehs

@rr.com

loan higher than value of vehicle

I have a Honda civic that I have been paying on for about a year now. The problem is, the car note is $380 per month, the loan amount is $17729 with a 12% but the car is worth $13000. I can't afford the payments anymore and I can't get it refinanced or cosigned. What should I do? What are my options?if it helps, I'm not late or behind on the payments but I think I will be soon.


Doctor Olds
I Need A Remedy For What's Ailing Me.
Premium,VIP
join:2001-04-19
1970 442 W30
kudos:18

2 recommendations

These articles may help.

• Upside-Down on a Car Loan - Options of What You Can Do if You are Upside-Down on a Car Loan - Kelley Blue Book
»www.kbb.com/car-advice/articles/···-a-loan/

• How to Get Out of an Upside Down Car Loan with Negative Equity
»www.moneycrashers.com/how-to-get···s-worth/
--
What’s the point of owning a supercar if you can’t scare yourself stupid from time to time?

Beezel

join:2008-12-15
Las Vegas, NV
reply to fynehs
Try to get someone to take over payments and let them re-finance it. Or try to get a different type of loan with a lower payment and pay the car loan off. Or bite the bullet and let the bank get it back. High interest rates is where they get you bent over.


CylonRed
Premium,MVM
join:2000-07-06
Bloom County
The high interest rate is likely because of a trashed FICO score. Highly doubt they will be able to get a different loan.

This is where a big down payment or a short loans guard against.

What was really sad is that it looks to be very likely the car was overpriced from day one. Too bad research was not done before hand...
--
Brian

"It drops into your stomach like a Abrams's tank.... driven by Rosanne Barr..." A. Bourdain


Ghastlyone
Premium
join:2009-01-07
Las Vegas, NV
kudos:5
reply to fynehs
I'd dump that car in a heart beat.

If I couldn't find someone to take over the payments, then I'd simply drop the car off at the dealer and hand the keys back and tell them to pound sand.

You're flushing your money down the toilet, with a vehicle loan, let alone at 12%.


hitachi369
Embrace Your Rights
Premium
join:2001-10-03
Grand Rapids, MI
kudos:4
said by Ghastlyone:

If I couldn't find someone to take over the payments, then I'd simply drop the car off at the dealer and hand the keys back and tell them to pound sand.

They are likely in this issue because of advice like yours. Plus if you are going to do a voluntary repo, you are better off calling the bank first and getting direction from them, verses just dropping it off at some random dealer.
--
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They who would give up an essential liberty for temporary security, deserve neither liberty or security
~Benjamin Franklin


Ghastlyone
Premium
join:2009-01-07
Las Vegas, NV
kudos:5
said by hitachi369:

said by Ghastlyone:

If I couldn't find someone to take over the payments, then I'd simply drop the car off at the dealer and hand the keys back and tell them to pound sand.

They are likely in this issue because of advice like yours. Plus if you are going to do a voluntary repo, you are better off calling the bank first and getting direction from them, verses just dropping it off at some random dealer.

Not likely. They are in this position more then likely from making late payments or defaulting on a credit card at some point. And then having no sense whatsoever, and signing a shitty upside down auto loan at a 12% interest rate. By the way, there are a lot of dealers out there that do in-house financing. So if it's through a bank, then yes, I'd call them up and tell them to come get it. If it's through a dealer, I'd drop it off right out front and hand them the keys.

Paying even a 3% interest rate on a constant depreciating asset like a vehicle is bad enough. 12% is absolute lunacy.

They would be better off saving money and purchasing a car outright, instead of flushing it down the toilet with a high interest rate loan.


Oh_No
Trogglus normalus

join:2011-05-21
Chicago, IL
reply to fynehs
said by fynehs :

I have a Honda civic that I have been paying on for about a year now. The problem is, the car note is $380 per month, the loan amount is $17729 with a 12% but the car is worth $13000. I can't afford the payments anymore and I can't get it refinanced or cosigned. What should I do? What are my options?if it helps, I'm not late or behind on the payments but I think I will be soon.

Based on what you said you have a 5 year loan @ 12% with $380 a month payments.
So you will pay an extra $6269.45 or about $97.96 average per month in interest for that car.

If you cant afford the payments, then you will lose the car anyways.
So can you be without a car for a year to save up money??
If you can live with out a car then return the car, save your money and buy something for like $3,000 after saving for a year.

The best thing to do is call the loan provider and tell them you cant afford the payments and want to voluntarily give them the keys to the car.

Now if you must have a car then you might as well get a 2nd job and keep making your payments otherwise you are screwed when they repo your car.


hitachi369
Embrace Your Rights
Premium
join:2001-10-03
Grand Rapids, MI
kudos:4
reply to Ghastlyone
said by Ghastlyone:

Not likely. They are in this position more then likely from making late payments or defaulting on a credit card at some point. And then having no sense whatsoever, and signing a shitty upside down auto loan at a 12% interest rate. By the way, there are a lot of dealers out there that do in-house financing. So if it's through a bank, then yes, I'd call them up and tell them to come get it. If it's through a dealer, I'd drop it off right out front and hand them the keys.

So yes, they are in this issue because of advice like yours. Buy more than you can afford and then squelch on the debt later. It is a vicious cycle and you are only suggesting to feed into it.
--
STOP THE NSA WIRETAPS


They who would give up an essential liberty for temporary security, deserve neither liberty or security
~Benjamin Franklin


Ghastlyone
Premium
join:2009-01-07
Las Vegas, NV
kudos:5
said by hitachi369:

said by Ghastlyone:

Not likely. They are in this position more then likely from making late payments or defaulting on a credit card at some point. And then having no sense whatsoever, and signing a shitty upside down auto loan at a 12% interest rate. By the way, there are a lot of dealers out there that do in-house financing. So if it's through a bank, then yes, I'd call them up and tell them to come get it. If it's through a dealer, I'd drop it off right out front and hand them the keys.

So yes, they are in this issue because of advice like yours. Buy more than you can afford and then squelch on the debt later. It is a vicious cycle and you are only suggesting to feed into it.

My advice is to dump shitty debt by any means necessary. Not ruin their credit on the hopes of scoring a 12% auto loan lol.

They wouldn't have a 12% auto loan if they paid their bills in the first place.

Beezel

join:2008-12-15
Las Vegas, NV
reply to hitachi369
said by hitachi369:

said by Ghastlyone:

Not likely. They are in this position more then likely from making late payments or defaulting on a credit card at some point. And then having no sense whatsoever, and signing a shitty upside down auto loan at a 12% interest rate. By the way, there are a lot of dealers out there that do in-house financing. So if it's through a bank, then yes, I'd call them up and tell them to come get it. If it's through a dealer, I'd drop it off right out front and hand them the keys.

Buy more than you can afford and then squelch on the debt later. It is a vicious cycle and you are only suggesting to feed into it.

It isn't always buying more than you can afford. Shit happens in life and sometimes you have no control over it. You don't know his actual situation or why he can't afford it right now.

But there are allot that do just what you said though. So he may or may not be one of those. But one shouldn't accuse one without knowing for sure.

Ghastlyone:

Also you can pay your bills on time and still have a high rate. Debt to credit ratio also affects interest rates.


CylonRed
Premium,MVM
join:2000-07-06
Bloom County
quote:
Also you can pay your bills on time and still have a high rate. Debt to credit ratio also affects interest rates.
Which usually means they have not dealt with money well and may not be far from being way over their head in debt.

It would have been FAR better if this person bought a cheap car without a loan... Especially since it looks like the car was upside down from day one - they bought it with it being upside down.
--
Brian

"It drops into your stomach like a Abrams's tank.... driven by Rosanne Barr..." A. Bourdain


Mittvok
Premium
join:2008-12-18
Grand Rapids, MI
reply to fynehs
12% interest on a Honda Civic? I have no constructive advice to give.
Expand your moderator at work


saillaw
Premium
join:2007-05-08
Dismay
kudos:2
reply to fynehs

Re: loan higher than value of vehicle

If you do a voluntary repo, and return the car, the bank will auction the car, deduct what they make, plus legal and admin fees and then the delta will be a debt you still owe the bank. So an estimate of how this will work:

The bank will auction it for about $9k
The legal and admin fees will be about $1500
So $17800 - 9000 + 1500 = ~$10,300 you will still owe the bank, and that will still be at 12% or more (assuming they will negotiate a payment arrangement, which they should).

So as you can see that is not a particularly attractive option unless you just don't give a shit about your credit.

If the bank that gave you the loan is small, you might be able to negotiate a change in your current loan. Tell them the truth, that you can't afford it and can't afford to sell it, and see if they can give you a better rate and better payment terms. The goal should be to get that negative equity paid off as soon as possible.

Or maybe you can find someone who is willing to pay the $13,000 for it. If so you can try negotiating again with the bank. Tell them that either way you have to get rid of the car, if they let you sell it to this guy they end up with an unsecured loan for $4,800 rather than the unsecured debt if you do a repo of $10,300. So if it is a smaller bank where you can discuss the issue with a human who can make such decisions, then they will see that as a better option for them too and they may let you sell it.

Part of the solution really depends on how bad your credit and income really is. If you are headed downhill anyway, and you are going to be defaulting on some debt, it's best to go ahead and default on the higher interest debt first.

Some people think that choosing to default on a debt like that is an ethical shortcoming. If its a loan from your parents or a friend, then I agree. But if its a bank loan, they priced the loan based on your risk profile, they take their portfolio of loans and allocate pricing and risk and interest rates accordingly, sometimes that risk comes to fruition and sometimes it doesn't. Unless you had the intention to defraud them when you signed the loan, I don't see it as an ethical shortcoming if they have to realize the risk they have been charging you. Most people don't agree with me on this though.
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