ASSISTANCE PLEASE

[Anonymous]

HI!

So I do not have good credit what so ever, but I am working on it...I filed bankruptcy in 2013; My scores have been in the mid 500's for quite awhile...Please dont scold me, I have a credit utilization of 46%...and I know I am working to lower the utilization to approximately 25-30%...Here is my dilemma...I purchased a truck in 2013, after my bankruptcy--I was in a car accident that totaled out my car, or else I would not have evem considered the subprime lender...anyway I am paying 16.5% interest on a 14,000 vehicle, payments are killing me at 363.00 for 72 mos...I attempted to go through my credit union to refinance, they were able to lower the rate to approximately 10% interest, however, it comes with a 36 mo term...Obviously lowering my interest, but increasing my monthly payment to over $400.00...Obviously, I cannot afford that at this time...Anyway, here is my proposal, and I am wondering if this makes any sense to anyone else...I am enrolled in college full time and also have a full time position...I do have the opportunity to take out student loans of $10,000 per year at 4.29 interest...Obviously, i do not have to pay back the loans while I am in school, but certainly plan on doing so...Anyway, I was thinking about applying my student loan to my truck balance and clearing that balance...I also have tuition reimbursement, so I can pay for my courses from reimbursement...I figured it is kind of a win win situation...If I continue to pay the interest towards my student loans while I am in school, I can claim the interest paid on my taxes for a return during tax season, and finally and most importantly, I would get rid of that God awful interest rate, and free up money that I can put towards paying off my student loans with my monthy work income...Does any of this make sense to do? I also would like to purchase a house, but need a credit score of over 620, i figure 

[Anonymous]

Its hard to borrow your way out of this sorta debt....Rather than put it off I'd deal with it head on. the sooner the better IMO. Bills may only go up. Have you thought about getting another part time job? Can you do anything extra for hours at your current job? 

[Anonymous]

Thank you for the reply...No at this time, I don't have the option to do a part time job, work full time and attend school full time...Job is decreasing overtime, so that is not an option...I guess I really looked at taking out the student loan as a fanagled refinance or balance transfer from a credit card...4.29% is way better than the 16% interest I am paying now...I thought it would be a better option..>I would continue to make monthly payments, same as my monthly car payment..>So I dont think I would necessarily be putting the debt off...?

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@Anonymous wrote:

Its hard to borrow your way out of this sorta debt....Rather than put it off I'd deal with it head on. the sooner the better IMO. Bills may only go up. Have you thought about getting another part time job? Can you do anything extra for hours at your current job? 

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[Anonymous]

If the only two options on the table are to continue with a six year 16.5% loan or to take out a 4.29% student loan to enable you to pay off the truck loan, I think it's a no-brainer. Go with the student loan.

Notice I didn't say use the student loan to pay off your truck.  That would be improper. You would use the student loan to pay for your tuition, school fees, books and supplies, room and board, and your transportation expenses directly related to getting to school. That will free up other money to pay off the truck loan.

However, money is fungible. That means that once the funds from the student loan are deposited in your account, it's no different from the money that you deposit from your pay check. So once it's there, you'll immediately pay down the truck loan with it. And then you'll continue to pay your school and living expenses in the same manner you have been.

It may seem like semantics, but at least this way you can say that you're using the student loan in the way it was intended (and you would be honest in saying so).

That's the answer to the question you asked. Here's some well-meaning advice that you didn't ask for (you can stop reading now if you want).

1. Sell the truck. I paid $5500 for the last car I bought, and we've been driving it for almost five years now. And I could pay cash for any (reasonable) new car I wanted to buy. You don't need to be as frugal as I am when it comes to cars, but you really can't afford a $14,000 vehicle right now.

2. If you do get the student loan, resist the temptation to use part of it for something fun. That's a trap that a lot of people fall into (with many kinds of loans). No vacation, no new stereo, so rims for your truck, no new gagets. You're trying to climb out of debt, not make yourself enough room for a little more spending.

Best of luck to you. I hope it works out well.

[Anonymous]

Totally appreciate the thoughtful and educated response...First and foremost, I spent 2 hours reviewing the Dept of Education website and all the loans available and terms...I am completely within my right and honesty statement by stating I will be using the funds to pay my truck...and when I say truck, it is a Nissan Pathfinder, and I am no youngly, 33yrs ond and 3 kids, so no new stereo, etc for me... I filed bankruptcy due to divorce and loss of employment....

Anyway, I figured it was a no brainer, but due to past mistakes, and recognizing I am a lesser vessel when it comes to credit knowledge, I figured I would put the inquiry out into the atmosphere and get some educated/experienced responses...Again I thank you for your input!

[Anonymous]

OH, i Forgot to mention...i thought about selling the truck, but I am upside down and cannot come up with the upfront to pay off the loan...so that was a no go...

[Anonymous]

Sounds like you're thinking clearly about it. So I'd pull the trigger and do it.

So if you paid $14k for it and you've been making payments on a six year loan since 2013 (even if it was the end of 2013), your balance should be less than $10k, right? So you'll be able to completely pay it off with what you can borrow on your student loan?

[Anonymous]

1. Sell the truck. I paid $5500 for the last car I bought, and we've been driving it for almost five years now. And I could pay cash for any (reasonable) new car I wanted to buy. You don't need to be as frugal as I am when it comes to cars, but you really can't afford a $14,000 vehicle right now.

I paid $950 for my vehicle, and I've had it for over six years. But I'm a cheap bastige. 

[Anonymous]

Do it. If I had the opportunity to do something like that, I would. The only thing is I may have read it wrong but do you still owe $14000 or $10000 or below? Otherwise you'll have to come up with the remainder.

[Anonymous]

I actually owe $12000 STILL...the original price was 14000; with the interest, it was approx $16000...I can pay the additional $2,000, and honestly, I can borrow mote with student loans, but I don't think its necessary...I did think about taking a loan out to only to get myself from upside down status...that would be $6000 and then refinancing, but I like the frst option better ans a higher credit score would result in a lower interest rate...I plan on doing the debt snowball, so this debt ia going to get paid off wwithin the next few years.