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Options for credit card debt and very upside down car loan?

I own a 2007 Kia Spectra with 33k miles on it. I have a loan with Americredit for roughly $13k and pay $460 a month. The car is worth maybe $5k. The car runs great, fairly new tires (had some get punctured by debris a year ago) and i keep up with the oil changes. I want to keep the car. However, with my $7,000 in CC debt from caring for my mother for 14 years and car insurance, I can no longer keep up with the payments. I took a pay cut, my hours are being reduced an d all my expenses seem to keep going up.

Americredit has already tacked on 2 extra payments on my loan and caught me up to make my loan current once, they claim they can not refinance and are not very helpful with options. Nobody will refinance because of the outstanding balance on the loan. What options do I have with the car? I thought about a voluntary repossession of the car, but that will probably make it worse being sued for the remaining balance after the car is auctioned, using it as a trade in would just put me in the same situation.

With the CC debt, I am talking to Care One and they are talking payments of $220 a month for all of my cards (plus $50 for the first month). That takes that payment down about $50 a month but the car is killing my budget. I am looking into more work hours and a second job. What are my options?

Joshua

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  • Gsncarpets77

    Whatver you do don’t “roll the negative”, that is to say refinance the negative equity (sounds like about 6k) into another car. Number one, if your credits getting dinged rite now then the chances of a re-fi or trading into a lower payment are zilch. Please don’t take offense, I’m just giving you an opinion from someone who has been there. Your with Americredit so I’m guessing about a 17 or 18 percent apr? Even if you could somehow trade the car in your payments would skyrocket and you would twice as “upside down” as you are now. This is my personal suggestion: Play hardball with Americredit, no matter how much they call you and dun you for money the absolute truth is that they do not want that car back, they repo it , send it to auction and get maybe 5 or 6 thousand and then turn around and apply that to your balance and then send you a bill for what’s left on your loan, they know very well that your not going to keep paying for a car you don’t have. If you really press them hard enugh they may be willing to add a few payments to the end if your loan, 63 or 64 months in other words. They might do some interest only payments. Just be careful how far you push it, good luck. 

  • Joshua

    I actually have an option presented before me.  A Ford dealership is willing to trade in my car and finance me a new car for a slightly lower payment a month.  This will make me current and get me out of this underwater loan.  It’s a 2011 Ford Ranger.  While not the best of choices, it’s not a bad vehicle. Without a down payment, the amount is about $20 less a month, but I plan on putting down some money, at least $300 if not more.  My fiance (we are due to be married in June) is co-signing because she has better credit than I do and is going to look to see if we have any more money we can put down.

    I know this is just a temporary fix and helps only a little, but I really don’t want to see a car repossessed.  And the interest rate is 5.19%.

  • Msullivan

    Joshua,

    It is always best to repay all debts on time and in full, but if you are really considering options, I would suggest that you prioritize your debts so that the most important debts get paid first.

    Normally, secured debt like auto loans come out ahead of unsecured debt like credit cards. You certainly have a bad car loan but you are correct that no one will loan your $13,000 on a car worth $5,000. if you don’t pay the auto loan you will likely lose the car, trash your credit and find yourself on the wrong side of a deficiency judgment.

    If it really comes down to defaulting on debt, make a wise decision about which debt to default on. I suspect that you have more room to work on the credit card debt than the auto loan with consequences that are no worse.

    Good Luck!

  • davey river

    I closed my Christmas club so i could keep up with my car payments; I know your situation is much more serious but look under every rock and every other place to see where you can stop spending.  I have switched to cheaper coffee and foods as well to make the payments!

    • http://GetOutOfDebt.org Steve Rhode

      Good tips. Another one is if you get a big tax refund back each year you are probably over withholding. Adjust your tax withholding to put more money in your pocket each month when you need it most.

      • Joshua

        Now I had a someone tell me that claiming more exemptions than you are technically allowed (claiming 2 rather than 1) is considered tax fraud. Is there another way that I am not aware of to reduce the withholding?

      • http://GetOutOfDebt.org Steve Rhode

        You can adjust your withholding by a specific amount. The goal of taxes is not to let the government use your money for free all year long it is so at tax time you either get a bit back or owe a bit.

        As the IRS says, “You should try to have your withholding match your actual tax liability. If not enough tax is withheld, you will owe tax at the end of the year and may have to pay interest and a penalty. If too much tax is withheld, you will lose the use of that money until you get your refund.”

        You can use the online Withholding Calculator to help you determine what you should be claiming.

        Here is what the IRS says about adjusting your withholdings.

        “If too much tax is withheld, you may receive a large refund when you file your return. If you would prefer to receive the money during the year, you should see if you qualify to have less tax withheld. If so, give your employer a new Form W-4 showing more withholding allowances.”

  • Strolyt

    Joshua, I can certainly feel your pain. When I was younger even if my pay sucked at least I had some greater assurance that a paycheck would be there than folks seem to have today.

    Have you considered joining a credit union? Many of them have somewhat less severe restrictions on loans, etc. They’re not going to gift your car to you, but they may be of a mind to refinance the car loan for a smaller interest rate. It’s worth a shot.

    Good luck, my friend. I don’t envy your predicament.

    Cheers
    Mike

    • Joshua

      I spoke to a few credit unions not too long ago and they all said the same thing.  Car is too upside down for them to approve a refinance.

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