Givitt
Member
Cash: $ 3.50
Posts: 16
Joined: 18 Feb 2006
Location: Honolulu
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| Car Loan is Killin her! |
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OK - my sis and her husband have 5 kids and their main car is a Durango, blue book $18500. But due to poor credit history they are paying over 11% interest on the loan, and they still owe $24000.
They want to buy a van and dump the Durango. A dealership is offering $14000 plus a deal on the van. I told her NEGATIVE and to try to sell it on the private market. But blue book is only $18500 and they owe $24000!!? I wanted her to sell it on the private, pay off the loan so it improves her credit rating, then buy a 1-2 yr old van. She wants to do that, but she can't pay the loan off.....what should she do???? Keep the Durango???
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Sat Feb 24, 2007 9:45 pm |
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rockhound
Preferred Member
Cash: $ 26.45
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Joined: 03 Feb 2006
Location: West Virginia
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| car loans |
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Well, your sister owes more than the vehicle is "worth", which puts her in the same situation as a lot of people. I guess we all know the first mistake was to get overextended on the loan for a vehicle that was probably too expensive for her in the first place, especially with such bad credit that they were hit with the 11% loan rate. It seems like there may be a lifestyle question here....does your sister think that there is anything wrong with her philosophy on buying cars, because there is a definite pattern. The first piece of advice would be "Don't do this again!"
I think it is probably impossible to break even, but the best she can do is minimize her losses. It seems to me that the two main choices would be to:
1) keep the Durango and continue making payments until it is paid off. If they can improve their credit rating, perhaps in the future they might be able to refinance the loan, or get a loan at a lower interest rate and pay off the original loan (I'm usually not a fan of getting a new loan to pay off another loan). If they keep the vehicle, they need to religiously maintain and take care of it, to prevent any other repair costs, and head off the inevitable "We need to buy a new car!" when the next repair comes up. They should also be looking to keep the vehicle for several years after it is paid off, to maximize its use.
2) sell the Durango for the best price she can. (As Coaster says, she'll still owe several thousand dollars on the original loan.) Buy a cheap beater for a few hundred dollars just to get to work. DO NOT GET ANOTHER LOAN FOR A NEW/NEARLY NEW CAR!! She can't afford it, and that's just the unpleasant truth that she has to face.
Also, you mention that their "main car" is the Durango. Perhaps they need to cut down to one vehicle and sell the Durango at a loss just to get out from under it. It sounds like they may have more widespread money problems than just this decision on the Durango.
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Sun Feb 25, 2007 6:42 pm |
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oldguy
Senior Member
Cash: $ 751.85
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Joined: 21 May 2006
Location: arizona
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Keep the Durango. The difference in payments between an 11% loan and a 7% loan are about $50/m - hardly enough to be the basis for such a poor decision. The Durango must be only 2 years old, they should drive it for the normal 200,000 miles and get the full use out of it - they'll have many years of trouble-free and payment-free miles.
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Sun Feb 25, 2007 8:54 pm |
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Givitt
Member
Cash: $ 3.50
Posts: 16
Joined: 18 Feb 2006
Location: Honolulu
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Well, first things first - her philosophy is so bad when it comes to $$$, she doesn't even have one. I'm helping her out now to get her $$$ mindset clicking. Her biggest problem is the space - with 5 kids, one newborn, it's really tough. She got herself in the hole, and needs to dig out. At least she tied her tubes after this latest one!
Her other car is paid off and her husband uses it for work so no prob there. I'm going to suggest she keep it and deal with the space matters.
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Mon Feb 26, 2007 4:07 am |
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