Should this person give up their car?

Given the circumstances below, I am trying to find the effect over a year or two for this person to give up their car — defaulting on the loan.

This person asked me for advice, and it was beyond me – let me know if you have the answer and some way to justify it against helping their credit score:

The person is paying on a car, has had it 1 year, and is getting charged 18%+ interest.

They now owe more than the original cost on it, due to penalties and late charges. They have been late 10 of the last 12 months, and are 60 to 90 days past due each month. There is no spare income for the person, and this will continue if they keep the car.

Their credit already very poor. About 500.

They can no longer make the payments. Or better put, if they try and make the payments, they will be reported as 60 or 90 days late for the next few years. They cannot make them on time as they have other significant debt. The person has already exhausted arrangements with the loan company or their other loans. They have no excess cash.

If they give up the car now, and then in a few months, are able to begin making other payments (utilities, and other debt, etc.) on time for the next year to two years, will their credit improve and can someone estimate how much? They have no revolving debt, but do have past due accounts. They do not have a home, but rent.

Or, will this defaulted car loan nullify any other positive credit moves the person makes in the next year to two years?

The person said the loan company will sell the car, but there will be a gap between that sale price and what the car is worth (makes sense). The gap will be about $4,000 to $6,000 from the deficiency of what the car is worth versus their loan. If the person has other significant debt, can they expect this company to let them make payments anyway on the deficient amount or will they demand it all at once?

Again, they are past the point where they CANNOT consider options like refinancing, making arrangements with the dealer, etc. They want to know if the default on this default can be offset right away with better payments on other debt, and raise their credit score, or if this default will keep them at very poor credit over the next year or two.

How long will the default stay on their report, and will it prevent them from getting approved for a mortgage in the 2 to 7 year timeframe, assuming they can get other payments in line?

Don’t know about the credit score stuff, but the definitely cannot afford the car. It needs to go. Turning it back to the bank is not always the best deal, but sounds like all they can do right now. As for credit score – I would look more into paying cash for things. The next car needs to be paid for in cash – a beater or whatever, but no more debt.

I can’t answer many of your questions. But from my ex-husband’s experience I can tell you one thing for sure. If this person gives up the car it will be sold, usually at auction and usually for less than it’s worth. Then the loan company or bank will come after this person for the difference in loan value minus selling price. Where my ex lives that means for about 12 weeks his pay was garnished, 3 to 6 weeks free, then another 12 of being garnished. And each round there is more in legal fees, interes, etc, so the amount due won’t decrease fast. My ex had to deal with it for seven years before the statute of limitations went into effect. Oh, and they went after his tax refund as well, I believe it was only his state but I’m not sure it happened about 12 years ago.

Is debt consolidation loan a good idea?

Hi all,

Well, my post from yesterday is still not on here, but neither are any other new posts??? My questions from that other message still apply, but I also have a new one and I hope that it gets posted and answered soon since the bank will close in a few hours! So, here goes!

Ok, so yesterday I called USAA, one of our banks, and spoke to the financial advice center there. The only thing that the girl said that I didn’t already know was to look into a debt consolidation loan. Well, I knew about them, I just didn’t think that we could get approved.

Will that bank, we can’t. But, Navy Federal I think has approved us. It should have the final stamp of approval today. It would be for 25K and would pay off the credit cards and our home equity loan. The only reason I want to pay off the equity loan is that I think then maybe we can actually sell the house because we could drop the price 10K- we could downsize. The payment on this loan is about 600 a month- which is about 100 more than our current min. payments on everything now. We aren’t able to pay all the bills for the first time ever as of this month. Right now, nothing is more than 14-21 days late, so it has not been reported yet.If we get this loan, I could make the payments before they are reported and the first payment would not be due until the end of Oct. I am going to ask if they can move that to Nov to buy us a bit more time, but I don’t know if they can. We are planning on having our in home daycare open by then, or maybe hubby will be in a great paying job in Afghanistan. but if those things don’t happen we will still be unable to make all our bills.

So here is the question. Should we do it since we would actually have a payoff date for everything this way and actually be making progress with the bills/ credit cards since they would all be combined in to one? I also thought that maybe it would be easier to work with one bank where we have a great history if we can’t make a full payment on just one loan than it is to try to work with all these different creditors. If we end up still having to file BK (and I am hoping that maybe this can prevent it) I don’t think it will matter if we have just hat loan vs having a bunch of different debts?

Let me know your thoughts and experiences pls…. This is all so new to me and it seems like a last chance!

M wife and I learned (as many others we later found out) why Dave Ramsey (website) calls them debt CON-solidaton loans. If you have not changed your habits, in 2-3 years, you will have racked up the cc’s again and, oh by the way, still have the CON loan to pay. Now you are doubly in debt. If, you will cut-up all cc’s, close the accounts and never, ever, borrow again, then a Consolidation loan may be a good venture. But, be warned. There are many people on this board who have wound up like us.

Our loan would save us about 225 a month vs not getting it and paying just our min payments. See, it would allow us to pay off enough of one vehicle (which we never use but have to keep fully insured as it is financed and have not been able to sell in 9 months) so that we can sell it. Just selling it and not having that payment and insurance would save us the amount of the monthly payment on the new loan. We had great experience with payday loans company called TnbLoans, and now we are looking for a similar provider offering debt consolidation loans. And, it would pay off all but one CC and would take a chunk off of that, thus lowering the min payment for that one. Plus, it is easier to work with one bill than a bunch of different creditors, rights?

Any other thoughts?

ya…I’ve been there and told myself this same story but 4 years later I am eagerly anticipating paying off this consolidations debt. It just never is as good as it sounds no matter how hard you try to spin it..trust me. Or dont, then talk to me in a few years. We paid off a vehicle, and now it sits in our driveway not running- two years into the consolidation debt the vehicle decided to have problems.. see where I’m going with this?. We paid off other stuff.

But what happens is you accumulate other stuff too in the process. The truth is, if you are willing to take on debt then you dont have your finances under control. This is just what I’ve learned. Once you finally make the connection that you dont need credit cards, refinancing, consolidation, etc. That’s when you finally become free from debt. Yes you still have to pay back what you already owe or file BK, but the realization alone is worth its weight in Gold. No one can make you realize it. You have to come to this on your own. I know I can talk until I’m blue in the face but there will come a day when you realize what I’m saying.

Yes, but in some places you just have to have a vehicle. If you don’t , you just can’t get to work. No work no money. Getting to work and getting that money coming in is the most important thing. Is not a luxury