I currently have an auto loan with Citizens Bank with a $520/mo. payment. I hate the car now and since my credit is shot as it is I'm thinking of letting them repossess the car. I just got approved to buy a new car with a payment of $341/mo. My question is this. I owe $27000 on the car and the value is only about $18,000. Will Citizens Bank come after me for the deficiency balance or do they have insurance to cover for the deficiency? If they will not come after me, then I will definitely let them repo it. I know that in Pennsyvlania which is where I live that wage garnishment is illegal so I do not have to worry about that. Can anybody help me out with some info? Thanks so much!
Re: Please help! Interesting scenar Jenz thanks for your input. If they get a judgement against me how exactly does that work? I'm not a homeowner. I have an apartment and I really have no assets. Do they just attach it to my credit and it sits there?
Re: Please help! Interesting scenar Good question! Yes it will sit there, and sit there, and sit there. See every state is different - you can guarantee at least 10 years on your credit, but some states they can continue to renew indefinitely, some only once or twice. then add in that in some states they can continue to accrue interest. so worst case scenario you could have this out there for 50 years and now owe $100k all because you didn't like the car. Now, in order to get credit or a mortgage you would need to have this paid off regardless of how old it is. Not worth it IMO.
Re: Please help! Interesting scenar In fifty years, depending on his current age, I'm not sure he'd give a hoot what's on his credit report. Essentially after they repossess your car, they have their security back. Your deficiency balance will not only be the difference between what you owe on the car and what it's worth, but when they sell the car at auction, they won't get any where near what it's worth. Thus putting you even further in the hole. Fortunately, the deficiency balance is UNSECURED debt. Meaning they have their security back, and can't really do anything more to you other than get a judgment. If your wages are exempt, and you don't have a lot of personal assets, I wouldn't sweat it. Sure you don't want it on your credit report, but if your report is already trashed, it's not like it's going to matter a whole lot anyway. In conclusion, I'd say if you can work out a payment schedule, or borrow the money to pay the deficiency off, great. If not, oh well.
Re: Please help! Interesting scenar If they get a judgment and keep renewing it, this means you can NEVER own anything. Not a house, not a car. And they may be able to levy against your bank account, even though they can't garnish your wages. How did you get this upside down? Owing 50% more than it's worth is unusual. A few thousand, maybe even 10%. But 50%? Did you have a previous car that you didn't like, and you rolled the balance over? I think you need to keep a car long enough to pay it off, whether you like it or not. After you get it paid off, buy only used cars. Someone else has already taken the depreciation.
Re: Please help! Interesting scenar Guys, Thanks so much for all of your input. I have learned a great deal from all of your posts. I still am not sure what I'm going to do but your insights will certainly help me make a more informed decision.
Re: Re: Please help! Interesting scenar That's pretty extreme. Depending upon the amount he'd owe, I don't think too many creditors are going to go to those lengths. It's true you'd have to pay off any judgment before you get a mortgage, and you'd have a tough time financing a car. But you'd probably have a tough time doing those things anyway with a crappy credit report. Sure a creditor can renew a judgment, but it's up to them to enforce it. They'd have to find your assets before they could garnish them. I've always pondered the wisdom of paying off debts even though the bad mark will still stay on your credit report regardless. Any honest person wants to pay their obligations, but they sure don't give you much incentive.
Re: Re: Please help! Interesting scenar If it were $2700 I'd agree. For $27K they may just go to extreme measures. That's a lot of money.
Re: Re: Please help! Interesting sc My deficiency balance would be right around 8 or 9k. Do you think they would go to extreme measures to collect that? I'm thinking they would have an outside agency try to collect it and if that was unsuccessful they would put a judgement on my credit report and leave it there. I live in PA so they cannot garnish me.
Re: Re: Please help! Interesting sc They can't garnish but they can certainly levy your bank account.
Re: Re: Please help! Interesting sc Whether your credit is bad or not, why would you want a repo on your credit report? I assume that if you were able to get another auto loan, the interest must be high if your credit is already in the dumpster. Imagine if your credit was good, your payments would be lower. Is it truly worth it? Why didn't the dealer offer you a trade-in? The trade-in amount definitely wouldn't be as much as the car is worth but trading it in, the dealer will probably pay off the current loan and resell the car. Either way, I think the dealer you are working with now is just trying to make a sale so they can get their commission. When you're eager, salespeople can sense it a mile away! Also, maybe you can sell the car on your own and use it pay off the 1st auto loan? But definitely check out how much the dealer can give you for your car. That should have been negotiated when they quoted the price for you. Even though in PA wage garnishment is not legal, is placing a lien against your bank accounts legal? Do you want to go around trying to dodge creditors by not opening accounts? Cars depreciate in value as soon as you drive it off the lot. You can't live in it. One day down the road, you may want to buy a home. Regardless of whether you pay off the judgment, your interest will still be high because the mortgage company or bank will view you as a risk. In the long run, it is not worth it. Good luck!
Re: Re: Please help! Interesting sc Would it be wise for me to open an internet bank account so they cannot find my local bank and try to levy it? Anyone know anything about that?
Re: Re: Please help! Interesting sc The bank didn't sell you the car, they only loaned you the money. For better or worse, it was your decision to buy the car. At $18K, presumably the car still runs. If it is really only worth $18k, if repoed and sold at auction, it will probably get much less than $18k, especially after fees. That will probably leave you with both a debt much more than $9K, and a repo on your reports. Your purchase decision is water under the bridge. How long do you want to live with its consequences?
Re: Re: Please help! Interesting sc My car loan was for 72 months. If i decide to let them repo it would it be wise for me to establish an internet banking account so they cannot find my checking account to levy it? I do not have to worry about wage garnishment since I live in PA
Re: Re: Please help! Interesting sc My concern was that if you have to finance over a long time (6 years), that is why you are upside down in the loan. A car is an expense, not an investment. Whether there is someone who will finance you to get into it does not make it a good deal, within your sane financial reach. If you are upside down, and are looking to get into another loan on another car, you are likely digging yourself in deeper still. You are not actually buying cars if after you pay them off you have nothing left.
Re: Re: Please help! Interesting sc Exactly. I agree 100% with Ontrack (whom might I add gives great advice!). Like I said before, it's not worth it. I guess there are many people out there who aren't happy with their cars but keep them until their loans are paid off or until they run it in to the ground. Opening up an internet bank account is okay but that doesn't guarantee that creditors can't find it, if they REALLY want their money, they WILL put in the extra leg work to find any assets you have. Putting a lien on bank accounts has nothing to do with garnishments of payroll checks. $9k may be enough for the creditor to dig a little deeper to find your assets, especially since they probably know that they can't garnish you. I still think that you should try to sell the car on your own and pay off the first loan or see if you can get a trade-in.
Re: Re: Please help! Interesting sc The path you choose today will determine where you are in 5 years.
Re: Re: Please help! Interesting sc Ontrack, I think that is one of the most powerful statements i have heard in a long time and is so true in so many aspects of our lives. <<thumbs up>>
