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Looking for options on my terrible car loan

Regular Contributor

Looking for options on my terrible car loan

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.

In the garden since 11/15/17 = Last FICO Update: 11/17/17 = CL 22,200 = EX 659 = TU 664 = EQ 717 = Make credit great again!

14 REPLIES
Valued Contributor

Re: Looking for options on my terrible car loan

This is what I would do and what I've suggested to many folks to do:

 

  1. Enter poverty spending mode.  This means things like putting cable/wifi on "vacation hold" for 6 months.  Cutting your grocery spend to essentials.  No consumer shopping, no bars, restaurants, movies, video games, vacations, etc.  Do it tomorrow and use it as an education to remind you in the future!  I've done it twice in my life.  The second time was easy peasy, the first time I'd rather not discuss, lol.
  2. Get a new/CPO/used car loan but as you said, don't get a fancy one.  Find the least expensive car for getting to work.  Do your due diligence, shop around a lot, take a friend with who negotiates well.  Get a preapproval for a loan from a CU or Capital One Auto or whoever (or multiple) -- some/many can be soft inquiries, too.  I would say go for a 48 month loan if you can afford it but don't hurt yourself.  60 months is fine.  72-84 is bad news unless you are assured you can make double payments early on to get the LTV way down quickly.  Double payments in the beginning hit principal down HARD which is what you want.
  3. Do your upside down new car loan and make sure there is NO PREPAYMENT PENALTY.  Using poverty mode savings, pay that loan down so it isn't upside down anymore, and review it every 6 months to keep it from never being upside down again.  If necessary, re-enter poverty mode in the future so you can get 80% LTV on your vehicle value going forward, by any means possible.

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.

FICO8FICO8Visit:
03/1710/17My 11
Rules to
Credit
Rebuilding
550EX
570TU
559EQ
710EX
699TU
734EQ
Message 2 of 15
Regular Contributor

Re: Looking for options on my terrible car loan

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....

In the garden since 11/15/17 = Last FICO Update: 11/17/17 = CL 22,200 = EX 659 = TU 664 = EQ 717 = Make credit great again!

Message 3 of 15
New Member

Re: Looking for options on my terrible car loan

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)

Message 4 of 15
Regular Contributor

Re: Looking for options on my terrible car loan

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. 


Message 5 of 15
Regular Contributor

Re: Looking for options on my terrible car loan


FMC 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

In the garden since 11/15/17 = Last FICO Update: 11/17/17 = CL 22,200 = EX 659 = TU 664 = EQ 717 = Make credit great again!

Message 6 of 15
Frequent Contributor

Re: Looking for options on my terrible car loan

If there is nothing wrong with the car I would do everything I could to scrape the 2500 dollars and refi the car. Makes much more sense financially even if that takes 2-3 months to come up with the money.
NFCU Sig Cash-20k/ Amex BCP-19.4k/ Amex Costco-1.2k/Chase Marriott-12k/CSP-13.4k/ Freedom-5.5k/ Discover IT-14k/NCSECU-5k/Walmart-10k/Lowes-25k
Message 7 of 15
Established Contributor

Re: Looking for options on my terrible car loan

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.

Ch 7 Discharge May 2015: EQ 588/TU 552/EX 570
Nov 2017: EQ 683/TU 660/EX 668 w/ 24% CC util reporting
Discover/Target/NFCU CLOC/NFCU Cash Rewards/PenFed Power Cash Rewards - $46k total revolving
Message 8 of 15
Regular Contributor

Re: Looking for options on my terrible car loan

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!

 

In the garden since 11/15/17 = Last FICO Update: 11/17/17 = CL 22,200 = EX 659 = TU 664 = EQ 717 = Make credit great again!

Message 9 of 15
Established Contributor

Re: Looking for options on my terrible car loan


TheCreditGame 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!

Ch 7 Discharge May 2015: EQ 588/TU 552/EX 570
Nov 2017: EQ 683/TU 660/EX 668 w/ 24% CC util reporting
Discover/Target/NFCU CLOC/NFCU Cash Rewards/PenFed Power Cash Rewards - $46k total revolving
Message 10 of 15