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What's the best way to tackle this? Want to sell car, pay off loan, but I'm upside down!

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paysontime
New Member

What's the best way to tackle this? Want to sell car, pay off loan, but I'm upside down!

So I have an auto loan with a credit untion for about $33K at 9.75% interest. It's worth about $21-22K. I need to sell it only because I can't afford it (I am continuing to accumulate debt). My expenses exceed my income. I have a second job.

 

I'm currently using about 30% of my available credit.

 

My FICO is about 675-700 depending on the agency. No late payments.

 

I applied with SoFi, Upstart, there's another one I don't remember at the moment. Anyway, the only one that wants to offer me something is Upstart, but the APR is at 20%. The only reason why I might want to go with this is to cover what I would owe to my credit union for the car after it's sold.

 

Any advise?

Message 1 of 8
7 REPLIES 7
Anonymous
Not applicable

Re: What's the best way to tackle this? Want sell car, pay off loan, but I'm upside down!

That's likely what you will pay for an unsecured personal loan.  If you are underwater by $11,000, a 20% interest loan is about right since the banks can't repo or foreclose if you stop paying.  That's one of the huge penalties for those who get auto loans at more than 80% LTV.

 

In the future, please learn from this!  We've all gone through it.  Future cars should only be financed at 80% LTV or less.  And then work hard on your payments to always keep your remaining balance at 80% so you have equity there.

 

An $11,000 loan at 20% will run you about $292 for 60 months -- you can save a LOT if you make larger payments, though.

 

One other option: enter poverty mode immediately.  Then try to make larger payments on the car so you can get into positive equity range.  The 9.75% interest is better than 20% interest for sure, and I assume you still NEED a car so this way if you enter poverty mode and throw more at the auto loan, you might find yourself in positive equity territory in a year or two.  More about poverty mode in my comment here: http://ficoforums.myfico.com/t5/Credit-Cards/How-do-I-handle-Utilization-I-m-troubled/m-p/4977109#M1...

 

Option #2: Check out TURO or one of the personal car rental apps.  I know a gal renting her car out for something like $55 a day and it lets her double her car payment.

Message 2 of 8
paysontime
New Member

Re: What's the best way to tackle this? Want sell car, pay off loan, but I'm upside down!


@Anonymous wrote:

That's likely what you will pay for an unsecured personal loan.  If you are underwater by $11,000, a 20% interest loan is about right since the banks can't repo or foreclose if you stop paying.  That's one of the huge penalties for those who get auto loans at more than 80% LTV.

 

In the future, please learn from this!  We've all gone through it.  Future cars should only be financed at 80% LTV or less.  And then work hard on your payments to always keep your remaining balance at 80% so you have equity there.

 

An $11,000 loan at 20% will run you about $292 for 60 months -- you can save a LOT if you make larger payments, though.

 

One other option: enter poverty mode immediately.  Then try to make larger payments on the car so you can get into positive equity range.  The 9.75% interest is better than 20% interest for sure, and I assume you still NEED a car so this way if you enter poverty mode and throw more at the auto loan, you might find yourself in positive equity territory in a year or two.  More about poverty mode in my comment here: http://ficoforums.myfico.com/t5/Credit-Cards/How-do-I-handle-Utilization-I-m-troubled/m-p/4977109#M1454489

 

Option #2: Check out TURO or one of the personal car rental apps.  I know a gal renting her car out for something like $55 a day and it lets her double her car payment.


Oh yeah, I totally forgot about TURO.

 

Anyway. Forgot to mention I already have another car, but it's a lease. The lease is up in 18 months.

Message 3 of 8
Anonymous
Not applicable

Re: What's the best way to tackle this? Want sell car, pay off loan, but I'm upside down!

I don't own a car myself that I drive but I do own portions of 6 cars we have up on TURO and similar apps and they are a significant income for the group.  One of the cars brings in almost $1200 a month!  If you have another car, check TURO asap and see what you can get leaving it listed 30 days a month.  You never know.

 

Also if you have friends or family who live closer to an airport, see if they're cool with you leaving the car with them for renting out and giving them $10 or whatever to handle key swaps (the cars I own portions of  have web unlock/lock so we don't even have to meet people, lol).  

Message 4 of 8
Anonymous
Not applicable

Re: What's the best way to tackle this? Want sell car, pay off loan, but I'm upside down!



 

Option #2: Check out TURO or one of the personal car rental apps.  I know a gal renting her car out for something like $55 a day and it lets her double her car payment.


I may be missing something, but why would someone pay $55 per day to rent a car? Most car rental rates per day are around $15 -$18 for a full size or mid size car (yes, I travel a lot and have checked), and even in places with high demand, there has always been a new, full size rental car available for no more than $30-$35.

 

I would recommend that the OP check his or her auto insurance policy before deciding to rent his or her car out to anyone. Allowing someone to borrow your car may be covered under your policy; renting it for revenue is often excluded.

 

Another very important point- you cannot rent out your car without your lender's permission as they hold the note and title. TURO may claim to offer insurance, etc., but if you rent out that car without the knowledge of the note holder, the note holder ( who is currently the car's real owner; you are not the owner as long as money is owed on that car) could possibly sue you if the car is wrecked by a renter.

 

Also, realize that if you do rent your car out to someone, and they damage or wreck it, the insurance payout will likely not be sufficient to cover the full replacement or repair cost of a car in that price range. Good luck, OP.

Message 5 of 8
Anonymous
Not applicable

Re: What's the best way to tackle this? Want sell car, pay off loan, but I'm upside down!

I second Humu's concerns. I have seen some exotic cars on Turo that people would pay for but I think it is unlikely that an average car would rent for that much.

Message 6 of 8
pipeguy
Senior Contributor

Re: What's the best way to tackle this? Want sell car, pay off loan, but I'm upside down!

Metro DC generally runs much higher that $15-$20 a day. Wife just rented a Chevy Cruze for 2 days for a trip, $92 for the retail from Enterprise and that was the cheapest anyone offered. My car (new version Impala LTZ) goes for $90 a day from Hertz, more at the airports. 

Message 7 of 8
Anonymous
Not applicable

Re: What's the best way to tackle this? Want sell car, pay off loan, but I'm upside down!


@pipeguy wrote:

Metro DC generally runs much higher that $15-$20 a day. Wife just rented a Chevy Cruze for 2 days for a trip, $92 for the retail from Enterprise and that was the cheapest anyone offered. My car (new version Impala LTZ) goes for $90 a day from Hertz, more at the airports. 


 

If you plan in advance, you can get DC for much less, either via Hotwire, via using certain aggregators, or via renting through a VA suburb. Smiley Happy

 

There is also a company my husband uses that scans rates and delivers the lowest rate, I cannot recall the name.

 

Alamo Insider has also offered quite a few last minute deals for us in major cities, including DC.

 

Actually don't need a car in DC proper most of the time if traveling there. If you live there and need a car to travel outside of the area, try planning a rental well in advance using Hotwire, or rent from a nearby suburb.

 

Several aggregators also exist that search for and find lower rates. 

 

There are all kinds of ways around high rates. Smiley Happy

Message 8 of 8
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