help with my car loan

[Vashtorian]

i have a car that i've had for 2 years, i had horrible credit when i got it (a score of around 515) and have a 20.4% interest rate. I have been trying to get it refinanced but i still owe more than it's worth and my credit still isn't great, better though (605). I am wondering if i should pay more a month to principal to get rightside up on the loan or not. I tried to get a rate adjustment with my lender but they don't do that, they say. I went to my credit union to see about refinancing but they said since i owe more than my car is worth (i owe roughly 13,800 and the car is worth roughly 11,000) and my credit isn't great i wouuldn't get a refinanced loan through them. I am thinking of maybe trading in my car at some point, should i get rightside up before i do that by paying more a month which will go to principal? Should i try to refinance with someone else now? Thanks in advance

[bjl584]

I would focus on paying off the loan and just keeping the car.

How much is your payment? How much are you able to pay each month?

[khosta]

I agree with Brian. Pay off that loan and keep the car! I mean, it drives right? Keep paying it off and try to bring your credit score up more. Even if you sell it you still have to pay the loan...

[Vashtorian]

i pay 402 a month i can pay more, maybe another 100 dollars. So if i tried to refinance or get another car in my situation it wouldn't be advantageous, i would just end up owing more?

[bjl584]

i pay 402 a month i can pay more, maybe another 100 dollars. So if i tried to refinance or get another car in my situation it wouldn't be advantageous, i would just end up owing more?

A refi in your case makes sense because you are paying a crazy interest rate. I would not trade it in on something else. You are already upside down. Focus on throwing as much as you can toward the loan to get yourself above water on the loan. Once your credit score improves and you are no longer upside down on the loan, then refi it. Then, keep the car as long as you can.

[Mithrin]

i pay 402 a month i can pay more, maybe another 100 dollars. So if i tried to refinance or get another car in my situation it wouldn't be advantageous, i would just end up owing more?

You owe 13.8K on an 11K car. If you trade it in, the dealer might give you 11K, or might give you 9K. The extra 2.8-4.8K will be added to the price of whatever you buy, so you'll start out even more upside down on that car. Also, rolling the current car's debt into the new auto loan will make it harder to get a decent interest rate.

Your best bet is to pay as much as you can extra on the car loan because 21% interest is very high. Once you get to where you're not upside down anymore, you can look into refinancing again (hopefully by then your credit score will have gone up, with more months of on time payments, and a lower overall debt as the car is slowly paid off). For the refi, you may need to keep trying, as the credit union probably won't do it when the value and balance are equal, you'll probably need to be ahead by some percentage. Also, they are not going to go by the Dealer Value or Private Party Sale value from kbb.com, they'll be looking at the Trade-in Value.

[littleroc02us]

I went to my credit union to see about refinancing but they said since i owe more than my car is worth (i owe roughly 13,800 and the car is worth roughly 11,000) and my credit isn't great i wouuldn't get a refinanced loan through them.

Why not sell the car for 11,000 and get a loan to cover the difference and then buy a beater for very little until you are ready to buy a car with cash. IMO, no one should finance a car unless it's for a very short period of time on a small amount. Also, do you have any debt or and EF fund, because I believe that ties into the problem your having?

[bjl584]

Why not sell the car for 11,000 and get a loan to cover the difference and then buy a beater for very little until you are ready to buy a car with cash. IMO, no one should finance a car unless it's for a very short period of time on a small amount. Also, do you have any debt or and EF fund, because I believe that ties into the problem your having?

My thoughts on that is that he may not qualify for a personal loan right now to cover the difference since he has bad credit and probably other debts. That's why I was leaning more toward paying down the loan, then doing a refi, then just keeping the car.

[Slug]

Have you looked at loans on Lending Club or Prosper? You might be able to get a personal loan there at a better rate.

[littleroc02us]

My thoughts on that is that he may not qualify for a personal loan right now to cover the difference since he has bad credit and probably other debts. That's why I was leaning more toward paying down the loan, then doing a refi, then just keeping the car.

Makes sense, but it doesn't hurt to try. I'd like to know more about his personal finances.

[bjl584]

Makes sense, but it doesn't hurt to try. I'd like to know more about his personal finances.

As would I. His credit is trashed for a reason. I'd like to see a list of his other debts.

[greenskeeper]

I would pay as much extra on the car as you can until you get above water or plan on keeping the car. Think of it this way, every extra dollar of principal you send per month you are getting 20.4% return on your money.

The ONLY way I would trade the car in and roll the balance into another car was if you could SIGNIFICANTLY reduce your interest rate.

Otherwise just pay extra until you owe what the car is worth and get rid of it, or keep the car if you like it.

[Vashtorian]

My credit got messed up from a combination of complacency and being unorganized, i got a credit card first about 10 years ago and just screwed it up, didn't pay for months, got the credit bureau after me. I got a loan about 9 years ago with cosigning from my brother to get my teeth fixed, about 3000 dollars and didn't pay on it for months and got a judgement against me, i paid it off in 5 months after that. I had a constant credit loan that i wasn't explained that the minimum payment was just interest and got frustrated with that and had late payments. I had several times where i was late on bills. I decided to get my credit back in order last year, i got my credit score, went to a credit counseling service, and figured out what i owed and paid it off. I only owed about 800 dollars on a few bills. I got a secured credit card for 300 dollars a few months ago and have paid it in full each month. I haven't had any late bills in around a year. I don't have any debts other than my car. I have seen my credit score go up from 515 to 605 in the past 8 months or so. I haven't looked at lending club or prosper, i'm just getting started working on my car situation, i felt that i would have some chance of dealing with it with my improved credit.

[bjl584]

My credit got messed up from a combination of complacency and being unorganized, i got a credit card first about 10 years ago and just screwed it up, didn't pay for months, got the credit bureau after me. I got a loan about 9 years ago with cosigning from my brother to get my teeth fixed, about 3000 dollars and didn't pay on it for months and got a judgement against me, i paid it off in 5 months after that. I had a constant credit loan that i wasn't explained that the minimum payment was just interest and got frustrated with that and had late payments. I had several times where i was late on bills. I decided to get my credit back in order last year, i got my credit score, went to a credit counseling service, and figured out what i owed and paid it off. I only owed about 800 dollars on a few bills. I got a secured credit card for 300 dollars a few months ago and have paid it in full each month. I haven't had any late bills in around a year. I don't have any debts other than my car. I have seen my credit score go up from 515 to 605 in the past 8 months or so. I haven't looked at lending club or prosper, i'm just getting started working on my car situation, i felt that i would have some chance of dealing with it with my improved credit.

I see two possible choices.

1) Throw as much as you can toward your loan, and once you are no longer upside down on it AND once your credit improves enough, then refi the loan to a lower rate. Then, keep the car for a minimum of 10 years. During that time save up cash for a future car.

2) Keep paying the loan until your credit improves enough for a personal loan. Sell the car and use the personal loan to cover the difference from the sale. Then, buy a beater car with the cash that you got from the sale of your current car. Pay off the personal loan, then focus on saving up cash for a future car.

The idea in both choices is to save up cash for a future car to avoid car payments ever again.

[JessMiami]

Yes, I agree with Brian. Just keep paying your car loan on time and keep your car. I was in the same situation and I just finished with paying car loan - Feels great to be free from that payment and not have to worry about a montly bill.