Need advice on Santander Loan Exit strategy

[Anonymous]

Hey Guys,

So, In Jan of 2016 with a credit score in the high 500's and 1 credit card of $600 I took out a loan ofo 30k from Santander Auto at 24%. I had no idea about loans, or credit at the time. My income from my business was 80k, so I thought I'd pay it off in 2-3 years. Well, 25 payments of $620 monthly later and my balance is still 22.5k(never missed a payment). The cars value is only 11k. So I'm 200% screwed. Every month almost I see $280 to principle and $340 interest. It flips from time to time.  Loan maturity reads 2022. I dont even believe that based on the last 2 years. I cannot get a refiance because I'm too far upside down.

My question is:

Since I have improved my credit to 710 with over 100k available credit(wife also has close to 100k), Should we split the 22k onto our cards?  We currently both have 20k cards with either 0% intrest or 0% balance transfers for 15 and18 months. I know we would take a ding on utilization, but we could pay at least half that down in that intro period(current UTL for either of us is under 4%). Then look for another balance transfer offer to give us another year to knock it out. Is this advisable? I hate paying these guys as my car devalues. I feel like a cornered dog.

[Anonymous]

In my humble opinion using your cards to get you out of this jam is what the cards are for. I am new here but I often see "Finances b4 FICO" and going from 24% to 0% for 18 months will save you a ton of money. I hope it all works out for you.

[Anonymous]

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@Anonymouswrote:

Hey Guys,

So, In Jan of 2016 with a credit score in the high 500's and 1 credit card of $600 I took out a loan ofo 30k from Santander Auto at 24%. I had no idea about loans, or credit at the time. My income from my business was 80k, so I thought I'd pay it off in 2-3 years. Well, 25 payments of $620 monthly later and my balance is still 22.5k(never missed a payment). The cars value is only 11k. So I'm 200% screwed. Every month almost I see $280 to principle and $340 interest. It flips from time to time.  Loan maturity reads 2022. I dont even believe that based on the last 2 years. I cannot get a refiance because I'm too far upside down.

My question is:

Since I have improved my credit to 710 with over 100k available credit(wife also has close to 100k), Should we split the 22k onto our cards?  We currently both have 20k cards with either 0% intrest or 0% balance transfers for 15 and18 months. I know we would take a ding on utilization, but we could pay at least half that down in that intro period(current UTL for either of us is under 4%). Then look for another balance transfer offer to give us another year to knock it out. Is this advisable? I hate paying these guys as my car devalues. I feel like a cornered dog.

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I wouldn't put the entire $22k on your cards. Perhaps just enough to bring the amount owed down to book value (or 120% of it, as some lenders will go this high on a loan) *then* go refinance the balance.

[Kree]

If you get the balance transfered for 18 months at 0%, you will be able to cut the principal in half by continuing to make your 620 payments.

Afterwards, assuming a similar 24% interest on the cards, you would be able to pay the remaining balance, plus interest, within 2 years with the same payments.

Note:  With the numbers provided I could not actually simulate your loan. The interest of 24% on an initial balance of 30,000 would require 15 years to pay off if making 620 payments. So my numbers provided are a little bit rough.

[iv]

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@Anonymouswrote:

Hey Guys,

So, In Jan of 2016 with a credit score in the high 500's and 1 credit card of $600 I took out a loan ofo 30k from Santander Auto at 24%. I had no idea about loans, or credit at the time. My income from my business was 80k, so I thought I'd pay it off in 2-3 years. Well, 25 payments of $620 monthly later and my balance is still 22.5k(never missed a payment). The cars value is only 11k. So I'm 200% screwed. Every month almost I see $280 to principle and $340 interest. It flips from time to time.  Loan maturity reads 2022. I dont even believe that based on the last 2 years.

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That math doesn't add up.

2016 to 2022 is likely a 72-month loan, and the numbers for a 30k 72-month loan at 24% APR are WAY off (higher) than what you are paying. (That would be about $790/month.)

But if the loan is 14% APR, 72-month, then it matches up pretty well - $618/month, with $22,621 balance left at the end of two years.

Remember, (most) installment loans have an amortization schedule - early on, the majority of the payment is interest, while towards the end, the majority is principal.

Assuming the 14%, 72-month loan, the first payment would be about $268 principal, $350 interest.  At the start of year two, it would be about $308/$309, and at the start of year three (where you are now), it would be about $354/$264. (Those numbers just so happen to have "flipped" from the first payment to your current payment... but it's not really a "flip" - it's an ongoing increase in principal payment and decrease in interest payment.)

And the start of year six would be down to $538/$80 - the further along you go, the quicker the loan is being paid down.  But that's also why the first couple of years, it doesn't seem to be moving very fast.  But it would be paid off as of the 72nd payment in 2022.

As for moving the loan to cards... if you think you can pay off the loan WITHIN A 0% BALANCE TRANSFER PERIOD, sure, go for it.  But if not, there's a good chance that the APR on those cards could be higher than 14%.  Be careful, check the numbers before jumping.

Being "upside-down" in the early years of an auto loan is not uncommon - and it doesn't matter unless you choose to trade-in for something different, or the vehicle gets totalled and you don't have GAP coverage. Reducing the APR would be good, just make sure you don't accidentally INCREASE it by transferring to a card that's 0% for a year, and then 20-something %.  (Also, high utilization on a card matters a lot more than high utilization on an auto loan for scoring purposes.)

You may just want to start making extra principal payments each month - even small amounts add up quite a bit over the course of the loan, saving you money, and ending the loan that much earlier.

[Anonymous]

I'm not sure why the numbers dont add up either guys. All I know is what I pay. As stated above the numbers of principle vs interest has changed, but not as above. Mine change from month to month in dramatic fashion. One month its 350-270, then next 600-120, then something different. When I asked Santander they were very vague, and almost avoiding my questions, all she would keep saying is that im charged interest daily.

I decided to take 17k on one of my Discover cards at 0% for 18 months to pay a large portion of the loan. I'll pay the 5.5k remaining in cash. My plan is to up my monthly payment to $1k on that Discover card. This will pay it off before the intro period.  I'd rather further build my relationship with Discover and pay the balance off early, than entertain Santander anymore. I realize that it was my choice to take the loan. Now that Im more educated in the matter, I'm taking my chips to another table.

Thanks for the advice everyone.