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Discussion Starter · #1 ·
We want to buy a house but don't currently have a rent/house payment. We need to free up money somehow in order to be able to afford to pay for a place to live.<br><br>
We owe $22,000 on our '03 Eddie Bauer Explorer. We needed the SUV when we bought it but have since moved from rural Hawaii. Gas is negligible because Dimitrius takes the shuttle to work and I don't venture far from home. I've talked to two dealerships who are willing to sell us new cars and give us $22,000 for our current car. The two different dealerships have also promised that they could get us into a new car with a monthly payment that is $100-150 less than we currently pay. That sounds good, right? But our credit is so much worse now than it was when we bought the car, that any loan we get would be double the interest we pay now.<br><br>
Is it smart to trade in the car to lower our monthly payments even if our interest would be higher and we would end up taking out a bigger loan than what we now owe on our current loan?<br>
Can you refinance an auto loan?
 

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Ya know, I don't know the answer. But I do know that I have learned a lot about living within my means and making good financial decisions from Suze Orman. Here is a link to her website:<br><br><a href="http://www.suzeorman.com/index.cfm" target="_blank">http://www.suzeorman.com/index.cfm</a><br><br>
She has good advice about where to start.<br><br><br>
Also, I've heard that first time homebuyers can sometimes get no money down loans. Maybe you could look into that. Try looking at eloan.com. We've financed with them and they have a great site with lots of assistance.<br><br>
Good luck!
 

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Discussion Starter · #3 ·
Thanks for the link <img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/smile.gif" style="border:0px solid;" title="smile"> We have a substantial down payment for the house.
 

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I think the best thing you can do for yourself is pay off the car, instead of getting a teeny tiny payment. Can you trade in the SUV for a car that is less expensive, and then pay a bunch every month until it's paid off? Paying off our car note made a world of difference now that we have a mortgage payment. It was a much better decision than trying to get a lower payment, because now we have no car payment at all.
 

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Discussion Starter · #5 ·
Well, we tried looking at less expensive cars but then the dealers weren't interested in buying our car for the amount we owe. I guess adding a couple of thousand to a much cheaper car wouldn't be that big of a deal. I suppose we could get a 5 yr old minivan or something for about $10,000.<br>
Or should I use some of the money I was going to put as a house downpayment to just outright buy a cheaper car?
 

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The strange thing about debt is that the when you have it and make your payments on a regular basis, your credit rating and score go up. Then, you can get lower interest rates for loans. So, owing money on that car will enable you to get a better home loan rate. And, the more credit cards you have, even if they are paid off, the higher your credit score. This is because you have as much buying power, according to the banks, as your credit limits on all your cards. So, closing credit cards does not benefit your credit and owing money on a car and making good payments will actually help you in your quest to own a home.
 

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Discussion Starter · #7 ·
Thanks boongirl, I'll remember that when we discuss buying new vs. buying outright. I'm thinking we can turn in our 03 for an 02 and then we would have a loan for less and that way our payments would be less per month but we wouldn't really be in a much different car or owe more than do now.
 

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In your position I'd be willing to sell the vehicle even at a loss in order to get out from under the large debt and then buy a more affordable vehicle. (I agree with PP though you would want to wait until after buying your house) Then, if you can sell your vehicle even to a private party and get out from under it I think you'll be ahead in the long run. I made a foolish car-buying decision or two before getting married and I still regret it. My situation was that I bought a vehicle that wasn't worth what I paid for it and was unreliable, I paid to put a new engine in it and then traded it on a lease vehicle for less than I owed. At least my lease vehicle was reliable but as it turned out we totaled it before the end of the lease. Thankfully we had gap insurance to cover the difference in what I owed and what it totaled out for. Anyway, no more bad car decisions here. I have a great DH who is super-intelligent about such purchases. Thank heaven.<br><br>
anyway, all the best to you.<br><img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/thumb.gif" style="border:0px solid;" title="thumbs up">
 
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