When I was still married, my husband bought a car for me. I got the car as part of the divorce and I continue making payments on it, however the car is not in my name. The car has been having an issue with oil consumption. Last time I took it in the mechanic said if they can’t fix it with the protocol then it will need a total engine rebuild. I need to trade in this car before things go bad and I’ll have to eat it.
I pay $650 a month, loan balance is about $13000, but I’m under water $5 - 6,000. It has almost 100,000 miles on it.
I am unable to roll the negative equity into a new loan because the loan is his and not mine. My scores aren’t stellar, but have been able to raise them significantly since January (in the 400s).
Current FICO scores EX 603, TU 589, EQ 589
FICO 8: EXP 613, TU 527, EQ 562
I have been pre-approved with Capital One Auto & Road Loans at 17.11%. I’m looking to buy a newer model used car in the low to mid 20’s. I am able to make a down payment of $4,000. Since I have been unable to trade in the car, I have asked him to co-sign the loan so I could refinance on my own a few months down the road. He agreed (he has excellent credit).
Will his excellent credit score help my interest rate? What lending institutions should I apply with the increase my odds of getting the best deal? I really would like to get that monthly payment down. I can afford it, but I rather not.
The ugly....I have 11 student loans reporting over 120 days late, on time since July 2018, one CC 90 days late and 9 charge offs that were settled. No late payment history this year; 2 of 3 collections removed. I feel like a complete idiot writing all this, but lesson learned.
Any and all advice is much appreciated.
First don't feel like an idiot. Most of us here have been in your position, we shared our stories to learn and help others so you sharing yours will not only help you but will help someone else at some point. Having a co-signer with excellent credit will help for sure. The 4K down is really important because you don't want to roll in a lot of negative equity. With a challangeing credit situation a new car might actually be better in several ways. Many have loan incentives that you could qualify for with a good co-signer, they all have warranties so that takes a lot of risk away, many have rebates that can help with your negative equity and finally lenders offer better rates for new cars because they are lower risk.
My suggestion is to go to one of the many great credit unions and apply with your co-signer for a new car auto loan, generally you can convert them to a used loan with a single call as long as the car you select meets their requirements but your interest rate will go up. Penfed is a great one and easy to join, if you can get into Navy they are excellent also and a great lender for someone in your situation for a variety of products like credit cards.
That approval will give you a great idea of how a lender sees you and your co-signer and with that approval and interest rate you can go to a dealer and hold their feet to the fire on any financing they would arrange for you. Dealers make most of their profit these days in the finance office so you want a preapproval before you go so they cannot mark up your interest rate. They will also pressure you into a bunch of protection plans and warranties. Those products rarely pay off and are a major source of profit so resist the urge to say yes. Again that is an advantage of getting an affordable new car, it has a warranty, you don't need two warranties.
There is tons of information on cars and pricing online, get a clear idea of what you want before you go, you can find competitive pricing online easily. If you know the car you want look at the dealers inventory, prefferably find the same car at two dealers and send them an email asking for their best price. Don't mention your trade at all until you have a price pinned down.
Finally don't buy any car you are not willing to keep for at least 5 years, keep it longer but don't go in thinking I will get something else in a couple of years. We did that many years ago and trading in cars every 2-3 years cost us big time. Frankly it is better to stretch your budget a bit to get the car you can live with than doing a trade after a few years, your paying a ton in transaction costs and car loans front load interest so that is all your really paying during those 2-3 years so negative equity gets rolled in and things get ugly. Guess you can tell I speak from experience.
In 2009 we lost our home to foreclosure, we never thought we would have good credit again, we lived fully off of cash and I hid from my credit problems for years. Finally in 2014 we needed a new car and I ran my credit for the first time in 4 years. My scores were upper 400's and my wife's were effectively the same. The good people here helped us rebuild to scores in the mid 600's within 6-9 months and 700's in about a year. We all speak from experience and all of us were embarrased at one point or another but facing my challanges was the smartest thing I have done financially.
Best of luck, keep coming back here and let us know what you do and how it turns out.
Can you rehab your loans? If you can, the negative reporting from them can be removed in about a week.
Well, you didn't mention anything about previous repos/chargeoffs on autos so this is easy.
First and foremost, lenders don't care about student loans or medical bills. They know the majority don't pay them anyway.
Secondly, yes, your ex husband's excellent credit on the front end of the deal will get you a better interest rate. Banks aren't really doing hide-a-bogues (using a good quality cosigner to cover up someone with bogus credit) anymore, but that wouldn't qualify here. That really only comes into play if you have awful AUTO history.
Thirdly, just go to a franchise dealership and let them work it... in most cases the best rate you're going to get is through their captive (Toyota Financial, Chrysler Capital, etc.) and with your down payment and the carry they'll get from your ex-husband's 'excellent' credit (depending on what tier he falls in the bank will allow 115% to 120% of clean retail to carry negative equity) you'll be fine. Hell, if you purchase a $20,000 vehicle and NADA retail spits out 20,000 as well, with your husband's excellent credit they'll be able to tack on the 4,000 to the new loan easy. 6-12 months down the road just refinance, but it'll be at a higher rate.