What to do with car loan I can't afford? Refi w/poor credit? Any advice?

[grisandole]

Long story short, I have a car I love with payments that are too high for me to afford. When I got the car it wasn't a problem, but with my divorce and all that has transpired since then I really cannot afford it. It is at a high interest rate due to credit issues. I have had the loan for 16 months and it is a 48 month loan.

The car will not sell for anywhere near what I owe on it, so I am at a loss as what to do. I am hoping to make a bit more money in the next few months but won't know for a while. (I work for the state of CA, our salaries are up in the air due to the budget crisis but I am supposed to get a pay increase).

Help!!!

[RiverSky]

I have read that car loans can be modified (similar to mortgages). Call your bank or loan company, tell them that you are having troubles with or think you will soon be having troubles with the payments and can they modify them somehow? Options are that they can reduce your interest rate significantly (without even looking at your credit score or caring), or they can refinance and stretch the loan out (as well or only). Once you find out whether or not they can help you, then you can figure out if you need to think of other options, instead.

[RollerCoasterMama]

How upside down is it? You said your credit isn't awesome, but could you sell it and borrow the difference? And then get something really cheap but reliable to drive? Skip trading it in and try to sell it on your own. You get a lot more for it.

Refinancing would be an option, but if your car got totaled, you'd still be upside down on your loan and that would stink big time!

[grisandole]

Thanks for the responses; I will contact the finance company asap and look up blue book...I will try anything!

[mnnice]

Have you looked at credit unions rates?

Credit unions are usually better about extending their best rates to used cars. A used car doesn't have to go through an apprasial or anything like a house does.

The credit union down the street from me has ads auto loan refi rates at 1.99 % (if your credit is not fabulous you might not qualify for the best rate, but it could still be much better than your current rate--provided your credit his at least as good as it was when you bought the car)

[grisandole]

When I got my loan over a year ago, my credit union and others would not even touch me since my income was all court ordered alimony/child support. It is garnished and direct deposited and I had six months of statements.

Unfortunately, my credit is worse now, hence the dilemma. My income isn't as much of an issue as I have had a full time job for a year in addition to child support/alimony (which has been greatly reduced) but due to the divorce my credit is shot.

[lunarlady]

You might have to contact the bank and arrange some jingle mail (basically you give them the car to get out of the loan.) The car itself is the collatoral for the loan, so once you give it back, then you should be able to get out, maybe paying a penalty. Yes, this shoots your credit in the foot, but if it is already thrashed you might find it won't affect you too much.

I'd list the car on Craigslist if you don't want to bail completely. You might manage to find a buyer. Use the money from the sale to pay off as much of the loan as you can, although you will still have to make payments until it is gone. Good news is that if you are carless, you can use the money you were paying toward insurance and gas to help cover the loan until it is gone. Once everything is paid off, you can look into getting a car that is within your budget.

Good luck.

[xmysticprincessx]

Have you tried getting a cosigner on a refinanced loan? A cosigner with good credit can help you get a lower rate. I'd go back to the credit union with the cosigner and talk to the loan manager to see what he/she can do, what your options would be, etc.

One of my friends had a car repossessed, and the car was sold at auction for thousands less than what he owed on it. The bank wanted him to pay back the difference, but he ended up settling for about $2500.