Rebuilding Credit - Refinancing Bad Auto Loan |
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TragicComic87
New Poster
Cash: $ 0.45
Posts: 2
Joined: 12 Feb 2015
Location: Nevada City, CA |
Rebuilding Credit - Refinancing Bad Auto Loan |
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Hi,
I'm brand new here. I went through a divorce a few years ago and have been sloooooowly rebuilding my credit rating. Two years ago, I decided to finance a vehicle to help in the process, knowing I'd get a terrible rate...which I did. Now, the vehicle is a 2007 model with 140,000+ miles on it with a $7,500 payoff.
With the year and mileage, I'm having a hard time finding any refinance options (my credit score doesn't help matters). The interest rate is 23.9%, so almost anything would be better than continuing this loan.
Does anyone have any suggestions for this situation?
Thank you!
Rick...
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Thu Feb 12, 2015 1:27 am |
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Wino
Senior Member
Cash: $ 113.80
Posts: 560
Joined: 03 Aug 2012
Location: Dubai |
It is a bit late now, but my suggestion would have been not to try to improve your credit rating by taking out a terrible loan. That having been done, I have some questions:
What is your income?
How much other debt do you have?
What are your monthly expenses?
What can you cut out of your budget?
You need to find some cash and pay off that loan as quickly as you can. Can you deliver pizzas? Can you walk dogs? Can you mow lawns? What can you do to increase your monthly income?
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Thu Feb 12, 2015 1:37 am |
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TragicComic87
New Poster
Cash: $ 0.45
Posts: 2
Joined: 12 Feb 2015
Location: Nevada City, CA |
Thanks for the reply. I'm self employed and can certainly pay the loan down over time. I was first trying to see if I had other options before dumping cash into the vehicle.
It does bring up another question - what is the best method to rebuild credit? I got some bad advice (get a bad car loan). I do have a secure credit card that I use and pay off regularly, but the info out there on the best methods seems so skewed, it's confusing at best.
Thanks again.
Rick...
quote: Originally posted by Wino It is a bit late now, but my suggestion would have been not to try to improve your credit rating by taking out a terrible loan. That having been done, I have some questions:
What is your income?
How much other debt do you have?
What are your monthly expenses?
What can you cut out of your budget?
You need to find some cash and pay off that loan as quickly as you can. Can you deliver pizzas? Can you walk dogs? Can you mow lawns? What can you do to increase your monthly income?
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Thu Feb 12, 2015 2:21 am |
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Wino
Senior Member
Cash: $ 113.80
Posts: 560
Joined: 03 Aug 2012
Location: Dubai |
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What is the rush to build "good credit?" The only thing credit is good for is cheaper loans and better insurance rates. The insurance rates are the ONLY reason that has merit.
That leaves "cheaper loans." This means you're borrowing money so later you can borrow money more cheaply. Do you not see a problem with this model?
Anyway, the best method to improve bad credit is to eliminate any defaults, late pays, or other "bad marks" on your credit history. You can only eliminate future late pays and past defaults, but over time, the earlier late pays become less important.
Once this is done, just get a credit card from anywhere, and pay it off every month. Use the card for gasoline or whatever, but pay it off every month. Just so you have a balance at the end of the month, you'll improve your credit. The most important thing, though, is to pay on time and never have any late payments.
The one thing you do NOT want to do is to try to speed up the process. Two years is not a long time in the big scheme of things, and even the worst credit will be over 650 after two years of no defaults/charge offs, no late payments, and fewer than 5 hard inquiries.
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Thu Feb 12, 2015 2:58 am |
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GardenCat
Full Member
Cash: $ 12.80
Posts: 63
Joined: 07 Dec 2014
Location: Colorado |
I agree with Wino!
I worked in consumer credit counseling for some years and dealt with many people who had basically screwed themselves by paying attention to bad advice.
The best way to build good credit is to use the card you have and pay it off every month (pay the statement balance in full). Doesn't matter if you still have some balance after paying the statement amount in full, that amount will be in the next months statement which you will pay in full.
Again, I agree with Wino's advice about your car loan. The best thing for you to do about this loan is just pay it off as soon as you can, leaving you with more cash flow every month. Make larger than minimum required payments and make sure the extra $ goes to principal on the loan.
OR, you can try to sell the vehicle for enough to pay off the loan and get yourself a good used car with an excellent reliability record (check Consumer Reports or Edmunds). Even getting a replacement car with a reasonable loan would be better.
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Thu Feb 12, 2015 8:14 pm |
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