Author Topic: How to get rid of car loans when upside-down  (Read 3642 times)

Offline Pukwudji

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How to get rid of car loans when upside-down
« on: October 14, 2009, 02:13:33 PM »
First I want to say I do not want to do anything dishonest and I intend to live up to my obligations.  However, since getting my two cars a couple years ago I have removed my head from my ass (thanks, Jack.)

I have two newer cars that I am severely upside down in (probably $3-5k upside-down on each) that I'm paying a total of $1100 a month on.  WHAT WAS I THINKING?!?!?!

I know, huh?

Well, like I said I've fixed my cranial/anal inversion issues.  Now, I could continue to pay on the three years left on these cars, but that is a lot of money going out the door.  What are my options to get out of these early?  I don't know if banks have an option similar to deed-in-lieu type deal for an auto and let me return the car and continue to pay off the upside-down portion.  Unless I can come up with the case I don't think I can sell unless I can make up the difference of what I owe.  I'd rather have a couple of used cars and put that grand into my preps and getting a BOL instead of financing a banker's vacation home.

I'm working on trimming expenses so we can put more toward paying down debt, but that has limited benefit and would probably take as long to acheive as just paying these cars off per the terms.  I'd rather not wait 3+ years before I can really start investing in my preps.

-Brian

Offline donaldj

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Re: How to get rid of car loans when upside-down
« Reply #1 on: October 14, 2009, 02:22:48 PM »
You've already lost the money. That first and second year depreciation are killers.

If the cars are reliable, I would just pay them off as soon as you can. It will save you $ on interest, and you'll have done the right thing as far as repaying your debts.

If a BOV enters into your prep methodology, and neither of these vehicles fills that role, een more reason to pay them off, sell them, and get a good used BOV. But, like I said, you've taken the loss on the value already. Minimizing interest is the only savings you'll realize now.

D

Offline Pukwudji

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Re: How to get rid of car loans when upside-down
« Reply #2 on: October 14, 2009, 02:56:09 PM »
I may have taken the majority of the hit, but due to the upside down trade-in, I'm still quite a ways upside-down.  I wouldn't mind keeping one of these cars (both are Outbacks) but one I'd like to replace with a truck.  I'm trying to get it paid down to where it isn't upside down.  Slow going so far.

-Brian

Offline ejsandstrom

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Re: How to get rid of car loans when upside-down
« Reply #3 on: October 14, 2009, 02:58:35 PM »
"I beleve that sometimes you have to wreck the car, to get the insurance money, to pay the car note"

You can go to the bank and do a volentary repo. They auction off the car and apply that to your loan. It sucks, it affects your credit, and you are still making a payment.

You can let someone take over your payments, you get out of the payments, and someone basically gets a used car at a good price.

You can trade one in, they take the upside down part and roll it on the new loan. This would only work if you went from a caddy to a pinto. You end up paying way to much for a crappy car but your payment drops.

You can talk to the bank and try to refi it at a lower rate or longer term.

None of them taste good, but what are you going to do.

Offline Stein

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Re: How to get rid of car loans when upside-down
« Reply #4 on: October 14, 2009, 11:33:56 PM »
Really, the best way out is to find someplace to borrow the difference and sell the car.

Say you owe $15k and the car is worth $12k.  You get a $3k loan (cc, bank, credit union, wherever) and sell the car for $12k.  You give the $12k from the buyer along with your borrowed $3k to the bank and get the title for the buyer.

Now, you have a $3k debt instead of a $15k debt.  Problem is you don't have a car.  Good news is that $3k will buy a ton of car right now, so you need to borrow another $3k. Still, you have reduced your debt from $15k to $6k plus you have stopped the depreciation slaughter.

The more you owe, the more sense this makes.  If your loan is for 5k on a 2k car, it won't work.

Another option is to save the money instead of borrowing it.  Don't pay extra on anything and take every extra cent and save it until you have enough to do the deal.  Or, sell stuff.  Or do both.

Offline LvsChant

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Re: How to get rid of car loans when upside-down
« Reply #5 on: October 19, 2009, 01:25:36 PM »
a family friend is in the same situation... widowed about 4 years ago... has bought 3 or 4 brand new vehicles in that time... each time she traded in, she rolled the extra left over from the previous vehicle into the new payment plan... she now has $30K in debt on a 1 year old Honda SUV and makes $700/mo payments.

She was recently bemoaning the fact in a conversation with me and my mom. When we heard the details of it, we were both flabbergasted that she had gotten herself into the situation.

Mom and Dad have an older Buick that runs fine that they were planning to sell (worth about $3K retail according to the books)... they offered to give it to her if she wanted to sell her Honda, pay off as much as she can and then pay off the remaining debt.

She turned them down! You just can't help grasshoppers sometimes.

Offline ubergeek

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Re: How to get rid of car loans when upside-down
« Reply #6 on: October 20, 2009, 07:23:16 AM »
I'm of a bit different of an opinion. I'd rather suck it up the next couple of years until one of two things happens.

1. You pay the car until it's not upside down then trade one or both off. You might find that you've gotten so close to paying it off, you'll just stick to it.

2. You actually throw every bit of cash you have at the cars and pay them off early. Then you have two decent cars that aren't beaters. At that point, you could probably still trade pretty close to even for the truck you want.

Both are crappy answers, but it really sucks to lose your ass on upside cars. The real solution is to pay your way out of this then not get back into the same situation.