Fixing negative equity - smart strategy?

MostlyCloudy — Tue, 26 Aug 2014 20:11:01 GMT

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?

Re: Fixing negative equity - smart strategy?

Burned2manybridgesB4 — Sat, 30 Aug 2014 19:57:53 GMT

Think very carefully....

Maxing card to 75%+ long term.. Bad. AA, and fees are another issue.

You're not paying off anything, just moving debt around, then getting a lower vehicle, and cash in hand, while your car balance grows faster under new Apr that's higher.... Bad.

Apply extra money to your principle, to reduce accrued interest long term.

topic Re: Fixing negative equity - smart strategy? in Rebuilding Your Credit

Fixing negative equity - smart strategy?

Re: Fixing negative equity - smart strategy?