So I'm $7000 upside-down on my car and am ready to just get rid of this thing and learn from my mistake. I dont have much cash savings to pay it off, but I do have a $16,000 credit line I can tap at any time. I was thinking about just using my CL to pay off the negative equity on this car so I can sell it for what it's worth. I'll of course need to buy another car so I'll get something used in about the $5000 range. Ultimately this means I will have no car payment, however I will have $12,000 in new credit debt at 12% interest. My car interest rate is 3%. The car will be paid off in 6 years. If I apply the same car payment I have right now to my CL then my CL will be paid off in 2 years . Of course I could pay it off even faster if I wanted depending on my budget.
So the question is, does this seem like a smart move? I know it sucks to trade a 3% loan for a 12% loan, but if it gets me out of debt in 2 years instead of 6 then that has to be a good thing right? Instead of losing $35,000 I will have only lost $12,000. Am I missing anything?
