@Anonymous wrote:
I have made the worst financial mistake EVER! I'm a current college student and I have been feeling overwhelmed and just emotionally drained because of this mess I have been doing.
I got myself into a car loan during late February with SANTANDER and my current APR is 20.99%. The last payment I have made was of $401 and only $81 went to the principal loan... horrible.
I have been going through a few options to get out of this mess as soon as possible.
1. Re-finance with another bank in a few months once I increase my income a little bit more.
2. Trade-in the vehicle for a cheaper one.
OR 3. Return the car as a voluntary repossession.
Any opinions, suggestions?
A voluntary repo will ruin your credit for many years and you will pay even higher interest on everything as a result for years. Plus your still on the hook for the difference between what they sell the car for and the balance due plus fees so your paying them to ruin your credit and take your car and you get nothing but heartache in return. I would suggest filing bankruptcy over a voluntary repo, they are a terrible idea.
Trading in for a cheaper car is not a great idea either, car depreciation and transaction fees ensure that you will have a lot of negative equity to roll into the next car loan so you will end up even further in the hole, rarely is this strategy a good idea so I don't reccomend it. Some will say get a car with a huge rebate to soak up the negative equity but cheaper cars don't have big rebates and that strategy ignores other costs.
What I suggest is take a deep breath, this isn't the end of the world and can be fixed if you are disciplined and focus on the objectives. Do yourself a favor and get and post your exact Auto Fico 8 scores here so we can provide some advice, also your debt to income, the cars payoff and the value of the car (kbb.com or edmunds.com), also the make, model and year of the car. WIth that information we can suggest ways to refinance the car to a lower rate which will save you a ton of money monthy and over the life of the loan. It may take a few months to get the scores to do this but in my example from about 3 years ago I went from 12.57% with our Santander friends to 4.29% with NFCU in a 7 month period saving me almost 8k in interest over the life of the loan. I had to do some rebuilding and used the advice of the great folks here to get it done. Recently I got a 72 month loan on my new car at 2.78% so there is light at the end of the tunnel. The big thing is to not do something that will make your life harder for years like add to your debt, negative equity or mess up your credit for 7 years.
Deep breath, we will help you.
