@Anonymous wrote:After my divorce I took a 25% apt loan due to credit issues on a 11,500$ car. It's been about two years and I owe about 10300 on it and it's worth about 5,000 now.
ive been pre approved to refinance it to around 12% with the ability of paying it off in 36 months.
experian: 650
equifax and transunion: 600
ive also been pre approved to roll the negative equity into a new car at 9%.
which would you suggest?
It seems like rolling the negative equity into the new car makes sense due to the lower rate. What would be the terms? Can you trade in the car? Do you have any money down? How much is the new car?
There's no way I would roll the negative equity into a new car. OP, the last thing you need is to tack on more debt with a newer car, even at a cheaper interest rate or lower monthly payment. "Looking at just the lower monthly payment" is how people get into financial trouble.
And don't forget, we are talking about a depreciating asset.
Take the re-fi and try to pay it off as soon as you can.
@Anonymous wrote:I took a 25% apt loan due to credit issues on a 11,500$ car. It's been about two years and I owe about 10300 on it and it's worth about 5,000 now.
ive been pre approved to refinance it to around 12% with the ability of paying it off in 36 months.
ive also been pre approved to roll the negative equity into a new car at 9%.
Kudos on the refi opportunity. That's quite a coup and will save you some big dollars.
As far as the 2nd financing offer, reducing the rate on your debt an additional 3% is helpful. But understand that against you outstanding loan balance, assuming 3 year payoff, the savings is approx $450 over the 3 year period.
Is that enough of an inducement to take on the larger financial burden of a new car loan?
Obviously there are pluses and minuses, but I don't think the $450 benefit alone, is sufficient to rationalize a new car purchase.
(FWIW, recognizing the depreciating nature of autos, I strive to keep my cars in very good condition and get at least 120k miles out of one before moving on to a new model (typically giving me 8 - 12 years on a car). It keeps my annual owner cost moderate, even with a bit of an upfront splurge on a nicer car).
