High interest auto loan- What to do?

[Anonymous]

Hello,

I am 3 months post Chp 7 discharge and in need of a car. I have been holding back and waiting patiently because I do not want a high interest rate. My scores are 618 Experian/598 Transunion/595 Equifax. I tried doing the Carvana.com thing because it would be easier but their offers keep saying 20% APR. I went to a dealership and tried to get a car last month and they offered me 19% APR on a 2019 Kia Sorento for $600 a month (CapitalOne). I told them NO, that was way too high. The salesman told me that the best thing I could do is take the loan, make the payments for a year, then go back and trade it in for another car at much lower interest rate, because by then I would have better credit for sure. 

I HATE car shopping and I don't know what else to do. Is he right? Any suggestions on this would really help me. I need a car but if all I can get right now is a high interest rate than I'm afraid I may have to do that. I do not want to wait another 6 months. 

[Girlzilla88]

You will have to bite the bullet for now I'm sorry to say but your best bet is to take that 20 or 19% now and just refinance it in a year mark.      That way of course you are not paying on it the life of the loan, but you build current vehicle report with good payments will have a positive impact as well.     We recommend minimum one year to get the best difference and although I didn't have a BK or anything I did have a lower CS than you when I first got my vehicle so I originally had a 17 or 19% so I feel your pain I do but year came and now I'm down under 4% when I refi'd with my Local CU ...so I recommend using a bank/CU when you go to refinance.      You don't have to necessarily trade but you can at the 1-2 year mark if you don't end up loving the vehicle you got.     But they are right.

[Girlzilla88]

Side note as well I also had to have a Cosigner my Credit was that poor at the time and when I refinance at the year mark I was able to put it under just me    

[Anonymous]

Thanks for the feedback. But how does refinancing work when you are upside down on your car loan? 

[Shooting-For-800]

Check Cap One navigator DIRECTLY.

You can prequalify without a hard pull.

Find a car that is way under KBB and enter that VIN.

Cap One is pretty good and the better the car deal, the lower the APR is (within your range.)

Car salesman have one goal - sell you a car today!

Dealership pad APR rates so they make even more money on you.

In other words, Cap One may be at 10% and they say they came back at 13%.

Call all your local credit unions and ask them their requirements after BK also. 

GL!

[Anonymous]

I got a used auto loan through Ally 5 months post dc with a 6% apr. I had initially looked at carvana and they had said 21%! I think a lower rate is possible just have to look around, as mentioned above credit union might be a good option.

A few years ago I took out a high apr car loan (21% I think) and regretted it. It was with capital one, I only made minimum payments and barely put a dent into the principal amount. So even after 2 years payments I still couldn't refinance because I still owed $13k on a car that was only worth $6k. Of course this was way back when I didn't know any better.

[Anonymous]

Buy a car for cash that you can afford.  Many local mechanics will be able to find you something reasonable for under $3000.

I've helped friends and neighbors find cars for under $1500 that drove fine for 2 years with zero payments.

[Anonymous]

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Thank you all for the suggestions. Im driving an old Dodge Caravan and I may stick it out for a while longer until I can get a good deal. I filed bankruptcy for a reason and I do not want to get back in debt or get into the same mess I used to be in. I'm thinking of waiting it out until I save $3000-$4000 to put down on a good car with a reasonable interest rate. 

[Anonymous]

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@Anonymous wrote:

Thanks for the feedback. But how does refinancing work when you are upside down on your car loan? 

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It doesn't, and kudos to you for thinking of that.

Folks need to be careful with the notion of "ohhh 20% is okay now I'll refinance in 6 months" because so often they don't realize that's not even possible with how easily you get underwater on a 20% loan.

Ride that Caravan out as long as you can. If you've made sure all of your accounts are reporting correctly, carefully chosen 3 credit cards (these can be secured) that you know you can get (so you don't waste inquiries) and practice AZEO, your scores will be in shape for a decent loan in a few more months.

I'm still a fan of using whatever you can save to pay cash for your next car, but if your heart is set on financing something you'll be able to get a much better rate a few months down the road having followed the above.

Good luck!

[Anonymous]

I highly recommend joining a local credit union.  I financed a car one day after discharge at 3.15% with my local credit union.  5 months after discharge they gave me a personal loan (16k at 9%) and 11 months after discharge they approved me for a credit card.  The rep called and apologized for the limit being so low. she said after i pay off the car and the personal loan they'd be able to increase the credit card limit.  The limit is..... $16,000.