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Need suggestions - should i pay off or not

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sghosh5
Valued Contributor

Need suggestions - should i pay off or not

I have a car loan for a 2004 chevrolet trailblazer. The car is now 140K miles. I checked blue book value of it and it show 3300 Smiley Sad 

I still owe 7500 dollars on the loan. The interest rate is 24.9%. Have several lates on the loan back in 2011. Since 2011 November no lates. The interest rate is hurting me. Monthly payment is $362. Payoff quote is $8700.

 

My question : is it worth it to pay off this loan or trade the car in? will paying off a car loan help me in future to get a new car loan?




Shell FCU : 5K
Message 1 of 8
7 REPLIES 7
ezdoesit
Valued Contributor

Re: Need suggestions - should i pay off or not


@sghosh5 wrote:

I have a car loan for a 2004 chevrolet trailblazer. The car is now 140K miles. I checked blue book value of it and it show 3300 Smiley Sad 

I still owe 7500 dollars on the loan. The interest rate is 24.9%. Have several lates on the loan back in 2011. Since 2011 November no lates. The interest rate is hurting me. Monthly payment is $362. Payoff quote is $8700.

 

My question : is it worth it to pay off this loan or trade the car in? will paying off a car loan help me in future to get a new car loan?


How is the amount owed $7500 but the payoff quote $8700?  I would definitely payoff early if possible why would you want to keep paying 24.9 for the sake of a better fico score not worth it in my opinion.  It might be a little reduction in fico to pay off because of the mix credit of fico scoring but it won't hurt because it is still a positive TL on your report that will stay on.  Any auto loan whether you pay it off early or thru the term of loan will help in the future providing you always pay that account on time.  JMO

Message 2 of 8
CAnNY
Frequent Contributor

Re: Need suggestions - should i pay off or not

I would pay it off if I were you. If your score drop then you can easily bounce back. what you cant bouncebavk from is the interest you will pay if u keep making payments. If you planned on buying another car then sure trade it in. However I would pay as a down payment the difference between what they give you for the trade and the balance if not more to prevent going into your next car upside down.

Starting Score: TU 489 EQ 561 EX unknown (2/24/2013)
Current Score: Lender Pull (11/15/13) EQ 702, TU 679, EX 684
Goal Score: 720


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Message 3 of 8
SamsungHDTV
Established Contributor

Re: Need suggestions - should i pay off or not

Pay that thing off! Ride it until it dies and get your monies worth.

Message 4 of 8
StartingOver10
Moderator Emerita

Re: Need suggestions - should i pay off or not


@SamsungHDTV wrote:

Pay that thing off! Ride it until it dies and get your monies worth.



^^^Yep, do this! Smiley Happy

 

Trading in is the worst thing you can do. You just keep rolling negative equity into the next vehicle and getting more and more upside down.Smiley Sad Pay it off.

Message 5 of 8
sghosh5
Valued Contributor

Re: Need suggestions - should i pay off or not

Thanks for all your suggestions. Yes i am thinking of paying it off.




Shell FCU : 5K
Message 6 of 8
Dustink
Valued Contributor

Re: Need suggestions - should i pay off or not

Make larger payments to reduce your interest expense.

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k       $8.5K          Closed          $19k      $6.5k        $24.2k        Closed         $5k       Closed     $8.5k        Closed      @2.49%
Message 7 of 8
Dapper_Dan
Contributor

Re: Need suggestions - should i pay off or not

You are upside-down on that car.  What you were offered is likely a low-ball price.  I'm sure someone with cash will pay slightly more for it than $3300.

 

The payoff and the amount due looks like you were hit with a ton of late fees.  The really bad thing killing your ability to pay is the interest rate.  Miles are fine, but a bank won't refi a car with all those miles.  Also, you're going to be looking for a cash buyer because nobody can get a loan on a car over 100k miles (some banks won't loan over 70k miles these days).

 

As your loan ages, assuming it's a simple interest amortized loan, the payments will apply to principal more than interest over time.  Your problem is that the first half of your loan term, all your payments went to interest on the loan rather than the actual principal.  This is part of why you have such a high payoff.  Even if you made all your payments on-time, you'd be in the same situation, just not as expensive.

 

The car is very old and very high mileage.  If I was in your shoes, I'd sell it for cash and pay off the loan.  It's not worth the payoff, so there's no point in coming up with $8k by yourself.  Scrape together $4k and sell it for $4k.  If a cash buyer will give you $4k and hope you get the clean title to him/her, that's another issue.

 

I would exit this situation as cheaply as possbile.  That involves selling it on the street for cash.

 

If you have $4k saved up now, call up the bank and tell them you're making a principal-only payment of $4000.  DO NOT allow them to apply the payment to the monthly payment.  Also, make sure there is no pre-payment penalty.  After your payment posts, get a payoff quote in writing (you'll need this for the buyer so that you're honest).  Keep in mind that your payoff only lasts about 10 days.  As time goes by, interest accumulation on the loan will increase the payoff.  But the sooner you pay down principal, the less you'll pay when the bank charges you interest.

 

Next, put a sign on the car, put it on craig's list, take out ads and sell it.  Once you have a buyer, send certified funds to the bank along with a notarized letter instructing them to send title to the new buyer and include a copy of the bill of sale.  You want to make sure you protect yourself from the bank trying something stupid (like putting a repo on your car) after you sell it.  Also, you want to make sure the buyer has what he/she needs to register the car and get it re-titled in his/her name.

 

The UPS store can notarize documents for cheap.  Meet the buyer and do the paperwork there if that makes you both feel comfortable.  Print out the DMV forms in your state in advance.

 

And in the meantime, make sure you have a good insurance policy on that thing.  If it gets totalled, insurance will pay you $3300 at best and you'll be stuck with paying the remaing $5k immediately to satisfy the loan.

 

Basically, that car is too old and has too many miles on it to have an open loan.  I'm sure it's a good and reliable car, but it's too risky to have a loan on it.

4/2012 **Paid off 60 month car loan in 60 months**
6/11/2012 500 Auto EQ (CarMax)
7/2012 **Paid off 60 month VW car loan in 32 months**
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8/18/2012 **New $500 CC from WalMart** (1st CC since 2008)
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Message 8 of 8
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