topic Re: Refinancing Very Upside Down Car Loan in Auto Loans

Refinancing Very Upside Down Car Loan

Anonymous — Thu, 14 Sep 2017 18:17:04 GMT

Hello -

I have a 2016 jeep renegade latitude that I bought Nov 2016, a few months shy of a year ago. I have a $675 car note a month and 16% APR. When I went in to buy my car I knew nothing about car loans so I got jugged.

The car is worth around 18K and I owe around 29K. So im a good 11K+ in the hole. I actually am not THAT upset about how negative I am, it sucks but my credit was in the 500s when I bought the car. So now, I have credit closer if not past 700. My main goal is to get a lower monthly payment because this almost 700$ car note is just killing me.

I have heard it is bad to trade it in because I wont get much for it all and I would be transferring a negative equity. I also read that I could sell it but that still has the issue of me coming up with $11k+ possibly - that I definitely don't have. I have seen that I could take out a personal loan to pay off the negative equity but that will leave me with a 300$ personal loan payment and a $300 car loan payment after refinancing and I'm back to paying $600 a month for this dang truck.

I am aware of how bad of a decision it was to get the truck. I had no guidance and the people at the dealership just wanted to make a sale and did not have my best interest in mind. So now I just have to deal with it and make the best decisions I can.

Does anyone have any suggestions for what I can do to get a lower car payment that does not include me paying $10,000 ..... I would really appreciate it!

Thanks !!

Re: Refinancing Very Upside Down Car Loan

StartingOver10 — Thu, 14 Sep 2017 21:29:15 GMT

@Anonymous wrote:
Hello -

I have a 2016 jeep renegade latitude that I bought Nov 2016, a few months shy of a year ago. I have a $675 car note a month and 16% APR. When I went in to buy my car I knew nothing about car loans so I got jugged.

The car is worth around 18K and I owe around 29K. So im a good 11K+ in the hole. I actually am not THAT upset about how negative I am, it sucks but my credit was in the 500s when I bought the car. So now, I have credit closer if not past 700. My main goal is to get a lower monthly payment because this almost 700$ car note is just killing me.

I have heard it is bad to trade it in because I wont get much for it all and I would be transferring a negative equity. I also read that I could sell it but that still has the issue of me coming up with $11k+ possibly - that I definitely don't have. I have seen that I could take out a personal loan to pay off the negative equity but that will leave me with a 300$ personal loan payment and a $300 car loan payment after refinancing and I'm back to paying $600 a month for this dang truck.

I am aware of how bad of a decision it was to get the truck. I had no guidance and the people at the dealership just wanted to make a sale and did not have my best interest in mind. So now I just have to deal with it and make the best decisions I can.

Does anyone have any suggestions for what I can do to get a lower car payment that does not include me paying $10,000 ..... I would really appreciate it!

Thanks !!

Welcome to MyFICO!

I am sorry that you ended up here based on what happened to you with this dealership (I assume). However, in the long run the dealer may have done you a favor - even if it is in a back-handed kind of way.

First, congratulations on moving your FICO score up over 700. I hope you are not relying on Credit Karma or one of the other fako score services. Let us know the source of your score and we can confirm if it is FICO or not. You may be able to look at the score and see what it says. If it says for 'educational purposes only' then odds are that it is a fako score and not a fico score.

The very first lesson to learn is that no car salesperson has the best interest of the consumer at heart. They have the best interest of their employer to keep at the top of their mind at all times before, during and after the negotiations. This is business basics 101. The seller wants top dollar and the buyer wants to pay as little as possible. You can be friendly while negotiating, but the seller's rep is not your friend. This is why you have to look out for yourself during the purchase process or have a knowledgeable friend help you through the process.

Trading in an upside down car can result in a larger negative equity balance because most dealerships will short you on the value of your trade.

You are upside for a couple of reasons:

1) You most likely paid top dollar.

2) You may have been succered into an extended warranty - at great expense. Check your contract. These dealerships use the extended warranty as a huge profit center. You may also have the ability to cancel the warranty and receive a credit toward your outstanding loan balance. This will help reduce the negative equity.

3) You may have also been succered into a very high priced GAP policy. There are excellent GAP policies that are not nearly as expensive - the dealership sells the most expensive GAP policy on the planet. You can cancel the remaining policy and have the pro-rated premium credited to your balance + get a good gap policy from your insurance company for a lot less.

4) It is possible that there are other non-sensical items added to your contract. Some may be cancelled and others it is too late to do anything about now. But a lesson learned is: read the contract before you sign.

5) The single biggest item contributing to your underwater situation is what you identified in your post: the high interest rate. Every payment puts you further behind in a way.

If I were in your shoes, I would:

cancel the extended warranty and get the credit
cancel the current GAP policy and get the credit
cancel whatever else you may have on the contract that would result in a credit to your balance
then see what the shortfall is for the loan. Get your valuation from CarMax - as they will put it in writing and actually buy the vehicle from you.
Then, after you receive all of the credits, Refi the vehicle into a decent loan. You should be able to significantly save on your monthly payment.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Thu, 14 Sep 2017 21:58:12 GMT

all of the above is good information and great advice however, I would urge you to find a GAP policy before cancelling your existing GAP policy if you have one. You wouldn't want to chance wrecking your vehicle with all of that inequity and not have GAP coverage. Also be sure that the GAP policy you do purchase will cover your inequity (most GAP policies dealer's sell will cover UP TO 150% of NADA clean retail + your deductible) so make sure the policy you get will make you fully covered. In addition what valuation tool are you using to figure your vehicle is worth 18k? I would suggest getting a value on your vehicle from NADA and look closely at the NADA clean trade in value as well as the NADA clean retail value. Hopefully the value you came up with is inaccurate and your vehicle is in fact worth a bit more. Many lender's and CU's will finance up to 120% of Clean retail believe it or not. And from experience I have seen many lender's finance up to 135-140% of clean trade with excellent credit. By cancelling any products you may have you could possibly refinance once those refund's are reflected on your payoff. Note that your payment will not decrease by cancelling any aftermarket products such as GAP, service contracts, etc. the refund will be sent to your lender and be deducted from your balance. I would suggest not trading in your vehicle because it will only add to your current situation and you will find yourself even more so underwater.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Fri, 15 Sep 2017 13:51:49 GMT

Thanks so much for your reply!

Yes, you are right they never will. This was just a rookie mistake. I use credit karma yes, I have never heard of a fako score. Where am I supposed to look? How is it legal for me to give them all my personal information and claim to give me my score with all the bureaus ad its wrong? What the hell! Wow…. I have checked other places when applying for credit so I do know my real score I just thought credit karma was accurate! I am mind blown….

I do have expensive GAP insurance and other things on my contract that I can take off. This is GREAT information and I really appreciate the time you took to answer! I really needed some guidance and I will defiantly start with your suggestions immediately.

Thanks a ton!

Re: Refinancing Very Upside Down Car Loan

Anonymous — Fri, 15 Sep 2017 14:51:09 GMT

@Anonymous wrote:
all of the above is good information and great advice however, I would urge you to find a GAP policy before cancelling your existing GAP policy if you have one. You wouldn't want to chance wrecking your vehicle with all of that inequity and not have GAP coverage. Also be sure that the GAP policy you do purchase will cover your inequity (most GAP policies dealer's sell will cover UP TO 150% of NADA clean retail + your deductible) so make sure the policy you get will make you fully covered. In addition what valuation tool are you using to figure your vehicle is worth 18k? I would suggest getting a value on your vehicle from NADA and look closely at the NADA clean trade in value as well as the NADA clean retail value. Hopefully the value you came up with is inaccurate and your vehicle is in fact worth a bit more. Many lender's and CU's will finance up to 120% of Clean retail believe it or not. And from experience I have seen many lender's finance up to 135-140% of clean trade with excellent credit. By cancelling any products you may have you could possibly refinance once those refund's are reflected on your payoff. Note that your payment will not decrease by cancelling any aftermarket products such as GAP, service contracts, etc. the refund will be sent to your lender and be deducted from your balance. I would suggest not trading in your vehicle because it will only add to your current situation and you will find yourself even more so underwater.

Great thank you. I will make sure to get my better priced GAP before canceling. And I used the kelly blue book website. I googled NADA but I cant find a tool to get my exact worth. Do you have a link to their calculatorI could use possily? If not, I will definatly still look into the NADA worth! I really do hope it was inacurate.

I was wondering where the deductions will be seen, thanks for that info. And yes trading in is not an option after the info I obtained here.

Thanks so much you rock.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Fri, 15 Sep 2017 14:51:26 GMT

Credit Kharma uses Vantagescores to provide you, your credit score. This is a "legal" credit bureau and is a real credit score, however this scoring system isn't widely used especially in auto lending. In auto lending most major banks and CU's use your Transunion, Experian, and Equifax auto enhanced 08 scores which you can find here on myfico by purchasing them. Credit Kharma can be a great tool for credit monitoring and for a base point to watch your "scores" for large fluctuation's but don't solely rely on them as they are not what most lender's use when making a credit decision.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Fri, 15 Sep 2017 15:01:35 GMT

http://www.nadaguides.com

If you have trouble looking it up feel free to post the VIN here, the trim level, options, and mileage and location (central region/midwest/etc) and Id be more than happy to get you some values.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Fri, 15 Sep 2017 19:16:55 GMT

@Anonymous wrote:
Credit Kharma uses Vantagescores to provide you, your credit score. This is a "legal" credit bureau and is a real credit score, however this scoring system isn't widely used especially in auto lending. In auto lending most major banks and CU's use your Transunion, Experian, and Equifax auto enhanced 08 scores which you can find here on myfico by purchasing them. Credit Kharma can be a great tool for credit monitoring and for a base point to watch your "scores" for large fluctuation's but don't solely rely on them as they are not what most lender's use when making a credit decision.

Ok got it, thank you!

Re: Refinancing Very Upside Down Car Loan

StartingOver10 — Fri, 15 Sep 2017 21:00:44 GMT

OP, I agree that how Credit Karma markets their score is deceptive. It is a legitimate score - just not one that any lender actually uses. That is where I think it is deceptive. If you look at their commercials you, as a consumer, would have no idea that the score they advertise is not a score that lenders use. That is my beef with them. The good thing is you can see your individual tradelines and balances and TL changes for free with Credit Karma - but as a general rule, ignore the scores as it will just confuse you (and all of us individually).

SEMO is right, you can get the scores that actual lenders use here.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Sun, 17 Sep 2017 03:45:26 GMT

As someone who just traded in a 2016 Hyundai Veloster that was $10k under water it was really easy for me. Don't get me wrong, I had to carry over some negative but not near as much as I thought because it ended up being about $6k.

I luckily found a lasting 2017 Hyundai Santa Fe Sport that had a lot of rebates and cash from the dealer cause they wanted to get rid of it with all the new 2018's hitting the lot and it only had 111 miles and drives/rides like a dream!

Luckily my bank helped me out tremendously with all of this so I didn't have to get the dealer to do anything at all.

Who do you have that car loan through? With you coming up on a year right now. You probably stand a good chance to refinance the vehicle for a much lower rate. Unless you have it with someone who won't refinance existing loans. But then you could look into moving it elsewhere.

All you would need to do is find the NADA value because most credit unions will finance it for anywhere between 125% to 150% above the average trade-in value as long as you end up getting GAP coverage.

I think you have a lot of avenues to go down on getting a lower payment. Just have to find the one that works best for you.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Mon, 18 Sep 2017 19:20:13 GMT

@VelosterBEAR wrote:
As someone who just traded in a 2016 Hyundai Veloster that was $10k under water it was really easy for me. Don't get me wrong, I had to carry over some negative but not near as much as I thought because it ended up being about $6k.

I luckily found a lasting 2017 Hyundai Santa Fe Sport that had a lot of rebates and cash from the dealer cause they wanted to get rid of it with all the new 2018's hitting the lot and it only had 111 miles and drives/rides like a dream!

Luckily my bank helped me out tremendously with all of this so I didn't have to get the dealer to do anything at all.

Who do you have that car loan through? With you coming up on a year right now. You probably stand a good chance to refinance the vehicle for a much lower rate. Unless you have it with someone who won't refinance existing loans. But then you could look into moving it elsewhere.

All you would need to do is find the NADA value because most credit unions will finance it for anywhere between 125% to 150% above the average trade-in value as long as you end up getting GAP coverage.

I think you have a lot of avenues to go down on getting a lower payment. Just have to find the one that works best for you.

Wow that's awesome! I finance with ally and they don't refinance. So I will have to go to my credit union and see what they can do for me. Like I said i LOVE my truck and i really dont want to trade it in I just have to get my note down. But yea, I just have to explore my options and see what works best. Thanks!!

Re: Refinancing Very Upside Down Car Loan

Anonymous — Sat, 23 Sep 2017 00:18:22 GMT

No problem! You probably will have some luck refinancing it with your CU. If not, then there are probably other CU’s you could sign up with to see about getting them to refinance.

Good luck!

Re: Refinancing Very Upside Down Car Loan

StartingOver10 — Sat, 23 Sep 2017 00:41:41 GMT

Most CU's and banks won't refi their own vehicle loans for a lower interest rate that's why it is a good idea to have relationships with a couple of good CU's and banks too.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Sat, 23 Sep 2017 00:43:34 GMT

True! I’ve found in recent years that some CU’s are better about helping you out but it seems like going somewhere new ends up giving you a better rate.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Thu, 28 Sep 2017 18:54:34 GMT

Hello again! I have my insurance coverage through Geico and they do not offer GAP insurance. Can I get JUST gap insurance from a company or do I have to have my car insurance with that same company as well?

Thanks!!

Re: Refinancing Very Upside Down Car Loan

Anonymous — Thu, 28 Sep 2017 18:58:22 GMT

Hello! I used that site you listed and got an even lower amount. An actual dealership called me and told me the traded in value of my truck but not what it is worth. I have googled around and cannot find anything trusting. Any suggetions other then just seeing what the bank says?

Thanks!

Re: Refinancing Very Upside Down Car Loan

Anonymous — Thu, 28 Sep 2017 19:17:28 GMT

I wouldn't rely on what a dealer says trade in value on your vehicle is. Call and ask a dealer what they would WRITE YOU A CHECK FOR, rather than trade-in value. When dealer's present you number's on your trade in vehicle it may not be the ACV (actual cash value) they can inflate the trade in amount, so to get a good idea of what your vehicle is actually worth to a dealer ask them what they would write a check for it for.

When trading at a dealer it is all a number's game, manipulating them in a way that makes it more presentable to the customer.

As far as GAP protection, I would shop around for insurance as I have found many times than not that Geico is usually higher..many other insurance provider's offer GAP coverage. In addition, wherever you end up refinancing, check with them to see if they offer GAP...many CU's offer their own type of GAP coverage.

Kind of off topic, but on topic in a way...I have alway's personally thought that purchasing GAP coverage from a third party is better than purchasing it through your insurance company. My reasoning behind this, and I may be wrong, is that if you total your vehicle and it is borderline being totalled or not, a insurance company may very well not deem your vehicle totalled if they have to pay a GAP claim as well. Think about it, if you are underwater on your vehicle and have GAP, the Insurance company may very well take on less losses by not totalling the vehicle and just repairing it rather than paying out an insurance claim and GAP claim. Which is return leaves you with a vehicle that should have been totalled and may never drive the same.

In the early 2000's my mother had a bad accident in a Honda CRV and the insurance company didn't total the vehicle even though there was a ton of damage to the vehicle, after getting the vehicle repaired my mom had to trade it in a few month's later because it just didn't drive the same.

As far as NADA showing a lower value, it really depend's where you live and what region you are in, some region's do use other appraisal tools such as Black Book, KBB, or NADA. In my experience I have found that most lender's tend to use NADA because it a more national representation of a vehicle's value. Make sure you have the correct trim level selected, and option's, and pay close attention to NADA clean retail and NADA clean trade in values, let's say NADA clean retail is $25,000 then it would be very possible to get up to $30,000 financed on that with good credit and a lender willing to do 120% of book value.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Thu, 28 Sep 2017 20:11:55 GMT

Great info there from SEMO!

I agree that you should definitely look into wherever you refinance the vehicle on whether or not they carry GAP or not. I don’t think that carrying GAP through your insurance company turns out good either.

I have GEICO and love them for my coverage, but don’t think I would carry GAP with them if they offered it.

As for the value of your vehicle. NADA is usually what is used by most places and kind of is the standard. If the dealer called and just gave you a random number. You can’t really trust it because most of the time if you were to show up and they find something wrong or off that makes them check a box on their paper, then they will lower that offer.

Re: Refinancing Very Upside Down Car Loan

Anonymous — Wed, 08 Aug 2018 04:04:13 GMT

what did you do exactly to trade in your car and knock off some equity? like what they said above? I need to trade in my car because I need a bigger vehicle now that I had my second child. I have a Nissan juke 2013 and my loan is a little over 12k and my tRade in value from KB says it's worth a little bit over 7k . I got my car at carmax.
I also need to get my payment lowered should I refinance my car first or just go to trade it in? this is my first vehicle and had no credit when I got it so I have a 26% interest rate . now I have a 638 credit score