Refinance vs. Trade-in... confused??

[CreditOCDinCali]

I currently am working with a credit specialist to repair my credit. He's successfully removed 7 negative items so far. I consulted him about refinancing my vehicle since finance is his field of expertise. I have a 2010 Honda with an interest rate of 22% and I wanted to refinance, but he insist that I trade it in as he said that would be my best option... I'm not sure how I feel about that. Does anyone else have any experience trading in a vehicle with high interest rate. I have 33 payments left on the vehicle and I'm $5,600 under- I owe $11,500.

[Watchmann]

That's pretty odd advice you are getting.  The whole idea of credit counselling is to get an individual out of debt and on the road to a better financial life.  It's hard to see how going MORE into debt by buying another car is a good idea.  A rough calculation shows if you pay out your loan over 33 months you will pay about $3,900 in interest.  That's quite a bit of money but trading for another vehicle will almost certainly cost you more than $3,900 in extra debt, and who knows what interest rate you will get.  I would try to refinance but if that can't happen than stick with your 2010 Honda and pay it off over the next 33 months.  At that time your car will be 8 years old and that is not old at all for a car, especially a Honda.  At that point you can reassess your situation.

[mynameainttracy]

I would check into refinancing for 36 months. Hiding your negative equity in a new car loan will catch up with you eventually.

[CreditOCDinCali]

I found it very odd too, but he said he has lots of connections in the auto industry so he can get me a deal that'll "eat away" at the $5,600 that I'm underwater or at least half of it. My credit score has dramatically improved since I purchased the vehicle in 2012. My score was 480 at the time now it's 631, and still climbing
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[StartingOver10]

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@CreditOCDinCali wrote:
I found it very odd too, but he said he has lots of connections in the auto industry so he can get me a deal that'll "eat away" at the $5,600 that I'm underwater or at least half of it. My credit score has dramatically improved since I purchased the vehicle in 2012. My score was 480 at the time now it's 631, and still climbing
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^^^huge red flag here!  

First, it is terrible advice for your specific situation to trade in a vehicle especially if you are underwater $5600+.  This advice that he gave you to trade in coupled with his comment to you in red above leads me to believe that there is something in it for him (referral fee or another undefined benefit).  It also defies any sort of credibility regarding his financial prowess. 

Refi what you have now and go over your credit report issues here in the rebuilding forum (for free) and measure your responses here against the advice you are getting from this financial consultant type person. There are lenders that will refi you into a decent loan with lower interest at your current score. Naturally we don't know the rest of your file and it could impact the rate and the terms of your new refi. However, usually a credit union is your best bet. You won't be able to refi with your current lender usually because they like having the higher rate. That's why we suggest going to another lender to refi. 

[fury1995]

Don't apply for more credit while you are repairing your credit.

If you can, refinance the car you have and SAVE your money for your other debts.

While I'm on the subject of saving and  not to pile on, the reason people come here is for advice...

So I'm going to give you some, for free.

I know you are appreciative of the help you are getting from the credit expert and I understand the reasoning behind seeking out their help but....

Everything that person is helping you do, you could have and can do yourself ... without the added cost of paying them for the service.

I would start that now, in the rebuilding forum.

[Anonymous]

That 22% APR is a killer but as you know your underwater on that loan so all you would be doing is taking on more debt to reduce the APR because dealers love folks that are in your situation.  If your car is reliable I would keep it and make additional principle payments to cut into the negative equity and reduce your interest exposure.  Even though you didnt ask about your credit expert I would say it is not likely he is doing anything for you that you couldnt do for yourself for free.  His advice is suspect.  There are great people here in the rebuilding forums that can provide you with all of the advice you need to get negatives removed and improve your score.  

[MauiMan85297]

Plus a bank will only finance up to 130% (Max) of book value and you will have to come up with the rest in form of down payment.  I don't think buying a new car and burying negative equity is the smart thing to do although with increased scores you'll probably get a better interest rate but probably won't offset the cost of negative equity.

[jhtrico1850]

I helped a friend escape a 25% 20k Santander loan for a 2010 Mazda3 to a brand new 2015 Mazda3 for 25k. Put 2k down. Payments are the same, but interest is just 7%. It was worth it in our opinion. New car smell, same car payment.

You have to look at the individual situation and see if it makes sense for you.

[jim44]

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@gsully00 wrote:

Plus a bank will only finance up to 130% (Max) of book value and you will have to come up with the rest in form of down payment.  I don't think buying a new car and burying negative equity is the smart thing to do although with increased scores you'll probably get a better interest rate but probably won't offset the cost of negative equity.

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Bingo,  You'll have to come up with money down to refi if you can't find a lender to refi the total amount owed on your present loan.  Also too, miles and year of the vehicle are taken into consideration.  The higher the mileage and the older the vehicle, the higher the interest rate.  Everyone in this post has excellent advice and most of us have been in your situation or one similar.  Good advice here OP and the best of luck in your journey!