Charged Off Car Loan - Best way to rebound

[medo]

Hello,

My partner has had is car charged off by the bank.  They have stopped trying to collect at this point and are in the process of repocessing the car.  At the time this started happening, he was floating around jobs with nothing stable.  Fast forward 9 months, he has a well paying job ($50k) and is looking at what the options are.

Does he save money to pay off the loan, which is more than what the car is worth, plus penalties, or should he say forget it and take my savings and start over fresh?

Would he even be able to be approved for financing?  And how detrimental is it to have a charge off and/or reporcession on your credit report?

Thanks for any advice.

[medo]

Any opinions/insights?

[Anonymous]

Just to clarify, you are asking if it is better to have your partner pay off the loan or have the bank repossess and what the aftermath of having a charge off or repo on your credit report is in terms of financing in the future correct?

[medo]

Yes, correct.

[Anonymous]

Okay. In terms of what your partner should do when it comes to the auto loan, I would say the ideal situation would be to pay it off or call the bank up and see what other options you have besides getting it repossessed. The reason why I'm saying it's better is because a repossession will cause major problems for you down the line if you were looking to finance/lease another car. Now i'm not saying its impossible but it will be extremely difficult. Funny you mention this because yesterday I went to a Mercedes dealership with a friend and my experience might help to answer your question. My friend took out a college loan for a couple thousand dollars when he first started but he later dropped out and totally forgot about it. I recently forced him to look at his credit score before going to the dealer.After he found out his loan went into collections and his credit score was horrendous because of it. After explaining the situation to the sales rep, the sales rep said " I thought you were going to say you had a repossession! If your gonna lease or finance a car, as soon as you submit your application and that repo comes up on your report, you will automatically be denied no questions asked". Repossession should be your last, last, last resort. I hope that I was able to guide your somewhere in the right direction and I wish you good luck!

[vertekal]

Now that he's making money, can he work out something with the finance company to prevent the repo? Or is it past that stage now?  

I had a situation where my car was totaled, and I didn't have GAP coverage. After insurance paid, I owed about $4500 which I did not have. Within weeks, I was able to buy 2 cars. However, one was at 20% and the other at 15.6% APR. So yes, you can still get a car after a repo, but you're going to pay a high interest rate. 

The funny thing is that the company I owed $4500 to (Santander) was willing to finance me again for another car as long as I paid them the $4500 I owed them first.

[Anonymous]

Hey vertekal, who financed you after the 4500 charge-off. What were your scores at that time? Also what type of vehicles did you get. Always curious about what would happen with no GAP in a total loss. Thanks.

[vertekal]

My g/f and I financed together. Our scores were probably in the 520's. We got:

2013 (brand new) Mazda 3 SV thru Exeter Finance @ 16.5% APR .. I think $1500 down and about $460/mo

2010 Ford Taurus thru CIG Financial @ 19% APR .. again I think $1500 down and $400/mo

A few months ago, I tried to trade in the Taurus for a 2015 Kia Optima. $1500 down, but I was too upside down in the Taurus to get it done. The funny part is that Santander (the company I owe $4100 to) said they'd finance me if I paid off my old balance. Unfortunately I didn't have that kind of cash laying around. I also never get any calls or emails from them .. they are really making no effort to collect. 

[Anonymous]

I think it is probably best for your partner to avoid repossession by calling the bank and working out terms with them, his financial situation has changed and he now has stable income so they will probably see that as an oppourtunity, the reality is he is on the hook for the difference of what they sell the car for at wholesale and what he owes on the loan, at some point they will likely sell that debt to a collection agency who will be a nightmare to deal with and will file a lawsuit that he will lose automatically, I was just sued for 800 bucks by one of these agencies for a 5 year old CC debt, if I had to to it all over again I would have worked out a deal with the origional creditor because I ended up paying the debt and getting the crap beat out of my credit scores for years.  Lenders don't want the car, they have to pay fees to repo and have financial risks so they will likely be willng to work something out if he is motivated and acts in good faith.  The sooner he deals with the better.  You can get a car post repossesion but the APR will be so high it will cost thousands more over the life of the loan so it is a pay me now pay me later proposition