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How can my friend get out of a really bad loan

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Anonymous
Not applicable

Re: How can my friend get out of a really bad loan

I guess my point here is that I don't trust ANYBODY to be concerned about my credit scores except me. I have several friends I have loaned money to in the last two and have yet to get it back. And I am talking thousands of dollars. One actually had the nerve to call and ask me to buy a car and let him pay me back since his credit is so messed up. Nope. Didn't ask for me to co-sign, which I would never have done. But I figure... you ain't paid me back what you already owe...MAJOR FURTHER RISK. And these are people that I have known for YEARS! I trust nobody with my credit scores and though selfish as it may seem...folks are on their own..no help from me whatsoever.
Message 11 of 21
BungalowMo
Senior Contributor

Re: How can my friend get out of a really bad loan



ObsessedwithmyFico wrote:
I guess my point here is that I don't trust ANYBODY to be concerned about my credit scores except me. I have several friends I have loaned money to in the last two and have yet to get it back. And I am talking thousands of dollars. One actually had the nerve to call and ask me to buy a car and let him pay me back since his credit is so messed up. Nope. Didn't ask for me to co-sign, which I would never have done. But I figure... you ain't paid me back what you already owe...MAJOR FURTHER RISK. And these are people that I have known for YEARS! I trust nobody with my credit scores and though selfish as it may seem...folks are on their own..no help from me whatsoever.


That's probably best!   About 8 years ago my brother co-signed on a car loan for me.  I'd had 2 30-day lates in dec 2 yrs in a row.  Never realized till a few weeks ago that they were on my brother's reports too! (he had me pull them for him) I did a GW to the bank expressing how much I wanted them removed from HIS at least...they removed both of ours & I was delighted!!
 
But like your name says...I'm obsessed!  So I wanted to be sure to clean his up too!
BK 7 discharge 06.24.2020 No Fico score at all. Smiley Sad
Message 12 of 21
haulingthescoreup
Moderator Emerita

Re: How can my friend get out of a really bad loan


@FicoPsycho wrote:
I am considering co-signing for him but cant bring my self to commit. i keep thinking if he has bad credit is for a reason and i fear he might bring me down the tube i dont know whats my best course of action here

Your brain is telling you which way to go. Smiley Wink

I agree with the others. If he doesn't want to pay twice the sticker on the truck, it's time for him to pull up his socks and get working on his credit. The whole buying-on-impulse thing is probably a pretty good indicator of why his scores are in the 500's.

We're all grown-ups here, or pretending to be, and until we get honest with ourselves and make changes in our financial and credit behavior, ain't nothin' gonna change. Good for you for wanting to help, and better for you for knowing not to get sucked down into his mess.



edited to fix a really bad typo! Smiley Very Happy

Message Edited by haulingthescoreup on 06-15-2008 06:25 AM
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 13 of 21
Anonymous
Not applicable

Re: How can my friend get out of a really bad loan

He could try to sell the truck but with car sales down right now and car dealerships offering great deals (like free gas for a year) your friend will have much difficulty in that.
 
My other suggestion is that your friend pay extra toward the truck each month if there is no prepayment penalty.
Message 14 of 21
llecs
Moderator Emeritus

Re: How can my friend get out of a really bad loan



FicoPsycho wrote:
I am considering co-signing for him but cant bring my self to commit. i keep thinking if he has bad credit is for a reason and i fear he might bring me down the tube i dont know whats my best course of action here


Without studying others' wise comments, NNNNNNNNNNNOOOOOOOOOOOOOO, unless you want to see the effects of a new repo on his and your CRs, if a new car loan or refi.
 
If interest is too high, tell him to pay it off early. Throw an extra $500 monthly and that will bring the interest down in a hurry.
 
Tell your friend to improve his CR. It is amazing what a few months of dedicated work can do to his scores.
 
Or, save the credit hassle and give the money to him in the form of a generous gift.
Message 15 of 21
BBYGRL
Established Contributor

Re: How can my friend get out of a really bad loan

Whatever you do, don't co-sign for him. If at some point he's unable to pay, you will have to. If I have learned anything about credit, do not let someone else's problem become yours. He should try to refinance. He might be able to get a lower APR. Good luck to him.
10/08 - EX 795 / EQ 816 / TU 806
6/09 - EQ 763 / TU 770

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Current Score (2/2010): TU-767, EQ-745
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Message 16 of 21
Anonymous
Not applicable

Re: How can my friend get out of a really bad loan

     We almost co-signed for my hubbys sister a mobile home, thank goodness the sales lady kinda talked us out of it.   She did end up getting a new one.  It was foreclosed on abt 4 years later.  
 
     Food for thought Vicki
Message 17 of 21
Anonymous
Not applicable

Re: How can my friend get out of a really bad loan

He has a 500 FICO for a reaon.  DO NOT CO-SIGN.  It will haunt you for 7 years if you do. 
Everyone has a story but the # simpy do not lie.  A 500 FICO has a massive default chance.  "Something will happen".
 
Now the good/bad news for your friend.
 
In short term he is SOL.  It will take him at least a year to bring his FICO up enough to make a refi wort it.  Second likely if he bought on impulse he got taken on the sticker also.  So the $16K he owes is likely on a vehicle worth $12-$13K.
 
If your friend is SERIOUS about getting ahead here is what to do:
1) Look up on KBB & Emdunds.  Look at the trade-in value for the vehicle.  Take the lower of the two.  Let's say it's $13K.  Now he knows how much negative equity he needs to erase.  Paying the minimum payment will not do it.   Remember as the loan goes down the mileage and age goes up so the vehicle is worh less.  He needs to work faster than the depreciation.
 
2) Needs to stop spening.  PERIOD.  Goal for next 12-18 months should be to get ahead.  Refi the loan will likely save him $200 a month in interest.  That is the prize.  Sell it as $200 raise every month for life (his next vehicle will have lower APR).
 
3) He needs to pull his credit report and find out why he has a 500.  Eveyone has a story "Cable company screwed me, ex wife is a thief, I got hurt, etc.  What does the CR say?  If it judgements, collections, large number of lates, high balances. 
 
4) Help him and use forum to find out (based on CR) what he needs to do in next year to move that score into mid 600s.
 
5) Start making 2 payments a month.  It is easier to stick with.  If payment is $520 per month on the 12th divide it in 2 = $260.  Now how much more can he pay?  Remember he has $2-$5K in negative equtiy to erase.  The other "bonus" is at 21% APR each $1 extra paid will save him about $1.20 in interest.  Pay $1 extra get a free $1.20.  Let's say he can pay $350 twice a month and he gets paid on 1st and 15th.  Don't wait till due date.  Setup automatic payments of $350 on 2nd and $350 on 16th.
 
If he gets paid every 2 weeks thats even better.  Setup payments every 2 weeks instead (day after payday).  This way he makes one full extra payment per year (52/2 = 26 * 1/2 payments  = 13 full payments per year).
 
MAKE SURE HE CHECKS WITH LENDER.  IT SHOUDN"T BE A PROBLEM BUT ALWAYS CHEK FIRST.  Some lenders do some questionable stuff like automatically considering 2nd payment principle only even in full payment hasn't been met for the month.  He pays down loan but gets hit with late fee.  CHECK WITH LENDER.  It shouldn't be a problem.  Most sub prime lenders prefer 2x monthly payments as the risk of default is high so anthing that prevents nopays or slow pays is good business.
Message 18 of 21
FicoPsycho
Valued Member

Re: How can my friend get out of a really bad loan


@Anonymous wrote:
He has a 500 FICO for a reaon. DO NOT CO-SIGN. It will haunt you for 7 years if you do.
Everyone has a story but the # simpy do not lie. A 500 FICO has a massive default chance. "Something will happen".
Now the good/bad news for your friend.
In short term he is SOL. It will take him at least a year to bring his FICO up enough to make a refi wort it. Second likely if he bought on impulse he got taken on the sticker also. So the $16K he owes is likely on a vehicle worth $12-$13K.
If your friend is SERIOUS about getting ahead here is what to do:
1) Look up on KBB & Emdunds. Look at the trade-in value for the vehicle. Take the lower of the two. Let's say it's $13K. Now he knows how much negative equity he needs to erase. Paying the minimum payment will not do it. Remember as the loan goes down the mileage and age goes up so the vehicle is worh less. He needs to work faster than the depreciation.
2) Needs to stop spening. PERIOD. Goal for next 12-18 months should be to get ahead. Refi the loan will likely save him $200 a month in interest. That is the prize. Sell it as $200 raise every month for life (his next vehicle will have lower APR).
3) He needs to pull his credit report and find out why he has a 500. Eveyone has a story "Cable company screwed me, ex wife is a thief, I got hurt, etc. What does the CR say? If it judgements, collections, large number of lates, high balances.
4) Help him and use forum to find out (based on CR) what he needs to do in next year to move that score into mid 600s.
5) Start making 2 payments a month. It is easier to stick with. If payment is $520 per month on the 12th divide it in 2 = $260. Now how much more can he pay? Remember he has $2-$5K in negative equtiy to erase. The other "bonus" is at 21% APR each $1 extra paid will save him about $1.20 in interest. Pay $1 extra get a free $1.20. Let's say he can pay $350 twice a month and he gets paid on 1st and 15th. Don't wait till due date. Setup automatic payments of $350 on 2nd and $350 on 16th.
If he gets paid every 2 weeks thats even better. Setup payments every 2 weeks instead (day after payday). This way he makes one full extra payment per year (52/2 = 26 * 1/2 payments = 13 full payments per year).
MAKE SURE HE CHECKS WITH LENDER. IT SHOUDN"T BE A PROBLEM BUT ALWAYS CHEK FIRST. Some lenders do some questionable stuff like automatically considering 2nd payment principle only even in full payment hasn't been met for the month. He pays down loan but gets hit with late fee. CHECK WITH LENDER. It shouldn't be a problem. Most sub prime lenders prefer 2x monthly payments as the risk of default is high so anthing that prevents nopays or slow pays is good business. ---------------------------------------------------------------------------------------------------------------------------------

thanks alot creditmizer those are great tips if anybody is wondering i chose not to co-sign for my friend he looked kinda bummed out but understood the reason. also he seems to be interested in the advice i been giving him and is trying to do whats right. he did get taken on that loan if only he would have called me before he signed anyways i kinda like that advice i think i might use it for my own auto loan thanks alot everyone for your input and making my easy decision even easier.
Message 19 of 21
thrasher865
Valued Contributor

Re: How can my friend get out of a really bad loan

My dad is a very financially responsible person, but had to file bankruptcy many years back over a cosigned loan.  DON'T do it.
 
Just FYI, when I was refinancing my motorcycle loan, the lady at my CU told me that my mom cosigning would only help the approval if I had bad credit, it would not affect my rate.  I don't know if she was misinformed or if this is standard practice or just for my CU, but you cosigning might not get him a good rate anyway.  I think a lot of places just use the primary borrower's CR and CS for coming up with a rate. 
 
Before cosigning, think to yourself, do I love this person so much that if they couldn't pay on this loan I would have no problem taking it over?  Just imagine you are signing to buy them a truck.  I would cosign for a daughter, son or spouse but under no other circumstances.  If your friends are trustworthy, they would have good credit.  Maybe if it was a really close friend with no credit because they had no loans or CC up to that point I would consider it.  I mean really close friend, though.

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Message 20 of 21
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