No credit card required
Browse credit cards from a variety of issuers to see if there's a better card for you.
In Feb 2017 when my scores were in the 500s I had to purchase a car on short notice (old one broke down, couldnt afford to miss work, etc) so I accepted what has got to be the worst auto loan I have ever seen.
301/mo, 54 months, 22.9 APR, 2000 down for a 10k loan on a car now worth about 5000 (4500-5500 per black book)
To date I have paid down to 7500, my LTV is currently 150 so I cannot refi this car right now. (and by the time i get to 6k or under the value may have decreased even more)
However
My scores have improved dramatically in the last nine months. My auto score 8s are currently 716 EQ, 670 TU, and 629 EX (and i have no idea why they are so varying, experian seems to hate my profile when it comes to cars even though ive never missed a payment? my FICO8s are in my sig for comparison)
My thought is to just go to a dealer or through a major auto lender and try to get a new car loan that will cover my old one, and get me into another higher value vehicle. Basically go trade-in value, roll over the remaining loan into the new one, and drive off with a different car hoping my improved profile would make it all possible.
I know the end result would be yet another upside down loan, but I need to get out from under this interest rate. Lowering the monthly payment wouldn't hurt either.
Ideally I would be aiming for something 200-250/mo with a single digit interest rate, 4-6 years, with a ceiling of 15-20k. I am not looking for an expensive ride, a 10k pre-owned would do me fine. I am highly aware though that a lender would be terrified of underwriting a loan that comes out of the box at 200% LTV or so.
Any options out there I am not thinking of? I really cant afford two car loans. There is nothing wrong with my current one, but I am paying 150 a month in interest right now.
This is what I would do and what I've suggested to many folks to do:
You can do this. It requires doing. It isn't easy, but it will be a huge stress relief when you get to the point that you owe 80% or less on your car's value!
Option #2
Enter poverty mode tomorrow and then put all your extra spend towards getting that car down to 80% LTV to refi. If the car is driveable another 3 years, this is a better option that will actually save you way more money. Then stay in poverty mode to start saving so your next car you finance at 80% LTV including trade-in.
I also put a feeler out to my local bank I do normal business with (payroll and my savings account are through them) but they are a small town bank and god knows if they will bite on a 150ltv loan.
We shall see. What really makes me sick? If I just paid down 2000-3000 on this car with one of my credit cards, it would be cheaper in the long run since the APR is lower on some of the cards than on the loan. Of course thats just moving money around accomplishing nothing.
Makes my head spin. But wait.... wouldnt that bring me into better LTV territory....
Moving 2-3 k to your credit cards is usually a bad idea- it will lower your credit score unless your limit on the card is > 25 k. This is assuming your credit cards are at <10 % utlization now ( probably a bad assumption ).
Fastest way out of the hole
You need a part time job to get that car down to 80% LTV and then turn it in on a lease deal for a stripped econobox ( like 175 / month) if you can qualify. This shoud take you about 12 months to pull off even with a minimum wage part time job. This will buy you time to raise your income and put some money aside each month towards the next car.
Best way out of the hole
Using a part time job - pay off the car and then drive it into the ground. Put some money away each month once it is paid off so you can get a 5-6 k replacement car paying cash. This may take 24 - 30 months ( hard to estimate without knowing your earning potential for a part time job)
Get out of 22.9 with your scores now. No reason to enter poverty mode to pay off 22.9 APR with your scores. How much neg equity will you roll over? Find an inexpensive new car you like with large incentives.
@Anonymous wrote:Get out of 22.9 with your scores now. No reason to enter poverty mode to pay off 22.9 APR with your scores. How much neg equity will you roll over? Find an inexpensive new car you like with large incentives.
Car is worth about 5000, owe 7500, so -2500
Fixing an upside down loan with an upside down loan (and even more wasted money on spending yet even more on another car) just makes no sense to me.
$2500 is not a lot of money. Play hardball with your budget, sell things you don't need, pick up a second job and throw all of the cash at the current loan and refinance in a few months. Pay off the remaining $5k and save for the next car and never be in this boat again.
So it turns out my local small town bank is more amazing than I gave them credit for.
I just refinanced (closing in a couple days when my current payment posts so we get a final payoff amount) with the following terms
36 months
235/month
3.9 APR
The LTV issue wasnt an issue to them, since it hasnt been a year yet, they said they can use the sale price I bought the car for as its "value"
So my LTV is actually 90 percent using that method. Holy crap!
@Anonymous wrote:So it turns out my local small town bank is more amazing than I gave them credit for.
I just refinanced (closing in a couple days when my current payment posts so we get a final payoff amount) with the following terms
36 months
235/month
3.9 APR
The LTV issue wasnt an issue to them, since it hasnt been a year yet, they said they can use the sale price I bought the car for as its "value"
So my LTV is actually 90 percent using that method. Holy crap!
This is great news! Nice, reasonable payment and for a short term. Well done!