I have an auto loan through Americredit. Paying 456 a month, loan was for around 20k and I am assuming around 17% interest. I have 40 payments left in a 72 month loan. Amongst other debts accrued from caring for my Mother, this large amount is very difficult for me to keep up with now. The loan is in negative equity to about 8500, more or less depending on who is appraising the vehicle, so I am finding it impossible to refinance with anyone. Went to a dealership and seen if trading it in for another car would help, but none of the dealerships in the area have vehicle that would bring my payments lower unless I had a huge down payment, which I do not have. Americredit will not refinance. They "do not have the ability to refinance any current loans" according to customer support. What are my options here? My credit isn't great, but my score is in the low 600's.
According to my calculator, you have $18240 left to pay on an auto loan that was probably for very close to this amount to begin with. And that's assuming that you never incur any late fees or other penalty charges. By your own admission, the car is worth less than $10000 today, and by the time this is paid off (assuming the car is still in running condition) might be worth $1500 to $2000 maximum. This sounds to me like a serious burden, and if you're struggling now, then continuing to pay on it will only delay the inevitable: that you will eventually be forced to default and the car will get repoed anyways. It may be in your interest to "cut your losses" now, quit paying on this car, and (if the creditor won't work with you) let the repo man cart it away. With the money you can save not making these payments, you can probably save up $2500 to $3500 in a few months and buy a cheap used car "for cash". Depending on your current financial picture, and the status of other expenses (such as ongoing medical expenses) it may be advisable to file for bankruptcy protection and dump all of your dischargeable debts.
I disagree with this advice. While bankruptcy may be a valid option, I don't think you need to go nuclear just yet. Letting the car go repo will thrash your credit even further. You will also be liable for the difference between the payoff amount and what the car sells for at auction. For example, if your payoff is $20000 but the car only sells for $9000 at auction, you're going to have a debt collector coming after you for $11000 plus fees plus collection costs plus etc. When you say you've had the car "appraised" -- have you checked the KBB / Edmunds / NADA values? While these are by no means guaranteed prices, they'll give you an idea of the fair market value of the car if you were to sell it yourself. Most vehicle appraisers are appraising it for auction or resale, which can be substantially lower than private-party values. With a credit score in the low 600s, you should be able to get refinanced, even if not at ideal rates. 17% sounds about par for the course, but it's worth shopping around a little more to see if you can do better. You may be able to find a local used car dealer willing to help you out by tacking your difference on top of the value of a used car. For example, if you buy a 2005 Ford Focus for $5000, and the difference between your payoff and your trade-in value is $8000, they might finance you at 72 months for $13k. Although not ideal, it's definitely preferable to bankruptcy. Whether or not this is possible depends on your state laws (some states prohibit a dealer from financing more than xx% of a car's fair market value) and the willingness of the dealer to help.
I'm sorry, sparq. Considering the totality of this person's situation, I just don't see how your advice would help anything. If this was his only debt, then I'd agree with you that letting the car "go back" to the lender would damage his credit, and could lead to a judgement that would necessitate filing for bankruptcy protection. However, this is not his only debt, and it sounds like he is really struggling to make ends meet. Even if there was some way to refinance this debt for slightly lower monthly payments, it wouldn't necessarily help anything. However, buying another car, and attempting to roll a huge deficiency balance into the new loan is not likely to lead to anything other than higher monthly payments, and a longer payoff period on a car that might not even be functional anymore when the loan is scheduled to end! Therefore, I stand by my previous advice to quit paying on this turkey, and see if the lender is willing to work with you--in a meaningful way--to reduce the burden of this loan. If not, I'd just let it go to the repo man. Monthly payments of $456 a month for a car are just plain insane, unless this is some super high-end luxury model (and it sounds like it's not). Adding on the cost of insurance, fuel, mainenence and repairs, and it sounds like you're paying more than $800 a month to drive this car! To put that into perspective, around here, a decent studio apartment rents for about $400 to $450 a month, a decent 1-bedroom rents for $500 to $550 a month, and a decent 3-bedroom house rents for $850 to $900 a month. Most people have car payments of $150 to $250 a month.
Mainly, I'm suggesting that he consider handing the car back in as a last resort. When you hand a car back, the loan won't immediately be resolved. First, the lender will want to sell the car as quickly as possible. To this end, it will probably be sent to auction, where it will very likely sell for 50% - 75% of its retail value. The debtor will then be responsible for the difference between the loan payoff amount and the car's final value, plus any costs to repair, transport, or refurbish the vehicle, and any fees the lender buried in the fine print. If the loan payoff is -- for example -- $17000, and the car's retail value is $10,000, and it sells at auction for $7500, the debtor will immediately owe the lender $9500. Obviously, the lender will not be willing to spread this into 40 even payments, since there's no longer any collateral. If $456 / month is a substantial burden, $9500 will be an insurmountable Mt. Everest of debt. The OP's best-case scenario would be to hope that the lender hands the matter over to a CA willing to freeze the interest and accept payments over two or three years ($263-$395/mo). But even then, the OP is only effectively reducing his payment by $50 - $190 / mo while losing the benefit of actually owning a vehicle. On the other hand, ff the $9500 is NOT a major obstacle, then selling the car privately and paying off the balance himself is the most sensible option. I'm only making this point because a surprising number of people believe that you can just voluntarily surrender your vehicle and walk away from a loan without liability. Doing so must really be considered a last resort somewhere between "taking on a second (or third, or fourth) job" and bankruptcy.
