Negative Auto Equity and Refinancing -- Opinions, please!

[Anonymous]

Hey, everyone!

So I have an $11k payoff remaining on my car that's worth $6k, so $5k of negative equity. My father is a cosigner on the car, and is now looking to purchase a car himself, and so I'm trying to remove his name from the note by refinancing--that's the goal.

As for me, I make $45k/yr, FICO scores in the 650s, with 1 settled collection reporting. I own no assets, as I rent an apartment for my home. 8% utilization of my total $1600 revolving credit limit.

I figure that a credit union is my best bet (sitting down with a loan officer face-to-face), and trying to achieve one of the following:

1) An unsecured personal loan for the payoff amount above (about $11k). I own the car, but now pay the credit union for the loan.

2) A refinance auto loan for as much as they'll give me for the car, and a personal loan for the difference (Probably $5k for the refi, $6k for the PL).

Do I have a shot at either of these outcomes? Or am I pretty much stuck in this situation until I pay the car off straight-up?

All opinions are appreciated!

[TRC_WA]

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@Anonymous wrote:

1) An unsecured personal loan for the payoff amount above (about $11k). I own the car, but now pay the credit union for the loan.

2) A refinance auto loan for as much as they'll give me for the car, and a personal loan for the difference (Probably $5k for the refi, $6k for the PL).

Do I have a shot at either of these outcomes? Or am I pretty much stuck in this situation until I pay the car off straight-up?

All opinions are appreciated!

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I doubt with a 650 score that you will secure an $11k personal loan that is unsecured.

I doubt with a 650 score that you will secure a $6k personal loan that is unsecured.

A refinance of a loan on a vehicle that is that far underwater is also unlikely unless you pay down the negative equity.

With $1600 in revolving credit your profile seems thin... which also lessens your chances.

Just my $.02...  I may be way off.

[jhtrico1850]

Your income shouldn't be a problem. Can you come up with a big amount of cash?

Or have you thought about trading it in outright for a new car payment?

We had a 2010 Mazda3, 80k miles, 20% interest through Santander, originally 6 years, with 5 years left, $385 payment. Tried to refinance left and right, at Bank of America, Capital One, BB&T, PNC, no one wanted it, even with 690 credit score, and 800 FICO cosigner. Too much negative equity...

Ended up getting a 2015 Mazda3, 6.9% 6 years, and the payment is just a little higher at $430.

[Anonymous]

This is a tough one.  Negative equity and low credit scores are not a good combo to get a refi.  I am normally very much against trading in a car with negative equity and rolling that negative equity into a new deal but that is probably the only way to get this done.  I am pretty sure you can get financed on a new car, especially if you get a good deal on price and perhaps have a rebate to help out.  Not sure that is anything you really want to do because of course you would have to buy a new car and start over so it is a big decision. 

What I would do is probably suck it up and pay off the negative equity as soon as I could through the use of additional principle payments.  That doesn't get your dad off the hook right away but hopefully he can get qualified with still being a cosigner, I suppose you could be a cosigner on his new loan if he needs the income.  

How long have you had the loan? 

[jhtrico1850]

If your dad has a good income, good FICO (700+), he shouldn't have any issue with getting a new car, even if he is still the cosigner.

[camera_jen]

I was in a similar situation with my car and my ex.  

When I went to my bank, they wouldn't refi my car simply because of its age before we even got into credit discussions.  When asking about personal loans, the only way to do it was to put the car up as collateral, however at the time since the car was financed they couldn't use it since there was a lien on the title and also had my ex's name on it.  Even though the loan was to pay off the car, I would have to have a clear title in my name alone before they could accept it as collateral since it wasn't mine alone to put up as collateral.

It's frustrating.  Ultimately I ended up just paying it off as soon as I could, but not after a few years of harassment from my ex.

[Anonymous]

Thanks for your input, everyone.

Though it will keep me from contributing any substial amount to savings, I agree with the concensus here that the best thing I can do will be to make as many additional principal payments as possible, and just get out from under this stupid thing as quickly as I can.

To those who asked, I have had the Santander loan since July 2011 (24.99% YIKES). My dad's credit is god-awful, so it looks like he'll just have to come up with a larger down payment or something to satisfy his prospective lenders.

As always, you've been a big help!