Possible Steps to Take for Car Loans
1. Assess Your Current Loan and Car
- Loan Details: Find out the exact payoff amount of the car loan and confirm the interest rate.
- Car Value: Check the current value of the car (even in its non-working condition) using tools like Kelley Blue Book or Edmunds.
- If the car is worth less than $6k, you’re in a situation called “negative equity” (owing more than it’s worth).
2. Rolling the Loan into a New Car Loan
- Many dealerships or lenders allow you to roll negative equity into a new car loan. Here’s how:
- You trade in the Infiniti as-is.
- The dealership applies its trade-in value toward your new car, and the remaining balance is added to the new loan.
- Risks:
- This will increase the monthly payment on the new car loan.
- You could end up paying more over time due to compounding interest.
3. Alternative Options to Minimize Debt
a. Sell the Car as-Is
- List the Infiniti on platforms like Facebook Marketplace or Craigslist for its as-is value.
- Use the proceeds to partially pay off the loan, and cover the remainder out of pocket or with a small personal loan.
b. Refinance the Loan
- If your credit score is around 700, you might qualify for a refinance on the remaining $6k at a lower interest rate.
- This won’t solve the car issue but could reduce monthly payments until you resolve it.
c. Consider a Cheaper Vehicle
- If you roll the loan into a new car loan, look for reliable, affordable vehicles (e.g., used Honda or Toyota).
- Prioritize low monthly payments that fit your budget.
4. Steps to Take Right Now
a. Contact Your Lender
- Ask if they allow you to roll the remaining balance into a new loan for a different vehicle.
b. Visit Dealerships or Credit Unions
- Dealerships often work with buyers in similar situations.
- Credit unions may offer better rates and terms than traditional banks.
c. Budget Check
- Ensure the new loan payment, plus insurance, fits into your monthly budget.
d. Consider a Co-Signer
- If you struggle to get a good deal on a new loan, a co-signer could improve your terms.
5. Be Cautious About Upside-Down Loans
While rolling debt into a new loan is a solution, it can lead to being upside down on the new loan. Minimize this risk by:
- Choosing a car below your budget.
- Avoiding long loan terms (e.g., 72-84 months).