How to get out of Upside Down Car Loan when already behind?

Question

Need advice for a friend-I thought I would ask here since I myself have never been in this situation. He joined the army few years back-had NO credit @ the time. A car dealer on base took advantage of him (and many others),sold him a car, told him to come back since his credit didn’t approve him for the one he drove away with, and they put him in another car with a MASSIVE interest rate & he was promptly upside down in the car. For over two years, he never made one late payment-but when he discharged from the army-he had to go on unemployment till he recouped from back surgery. During that time he fell behind in payments & has been struggling ever since. He can’t get re-financed since he is already behind in payments, (the finance places said he can’t have made a late payment in past 6 months), & his credit score is low. He owes around 13k on the car, & its worth only $6k. So nobody will refinance until he stays current for 6 mnths-but he can’t get caught up & DONT want repo!

Answer 1

is he back to work? if so, he needs to show some stability in his employment, then he will need to find a car with a lot of factory rebates usually a high priced car to hide that kind of neg equity. if your last option is to repo. don't get to discouraged. there are banks that will buy someone with a repo, not multiple repos, but one isn't as bad as people let on, bad things happen to good people so don't be suckered into trying to hold onto something that isn't gonna get you anywhere anyway. repo it if you have no choice. yes you will have 7 + years of bad credit but you can get another loan from a reputable dealer right after the repo, look into a dealer that has Credit Acceptance Corp or Condor or Americredit or Capitol One, or Wells Fargo or CSP credit. you can also go through a credit union. he may be a member of the USAA credit union which is very liberal with auto loans.
don't be blue this happens all the time, which is where the dealers get the bad name from.
feel free to email me for more info on how to handle this situation!

Answer 2

He's between a rock and a hard place. His problems started when he agreed to a MASSIVE interest rate. While we both understand that agreeing to such charges is rather stupid, also bear in mind that stupidity does not relieve one of financial obligations.

If he does not pay up promptly, the car will be repossessed and sold for far LESS than its current market value. He will then be sued for a judgment for the deficiency amount, plus repossession and storage costs.

Sad to say, unless he can come up with the cash to bring himself current, he's going to lose the car to repossession.

Even if he finds someone willing to do a loan on this car, he's not going to get a loan for more than current value of the vehicle. That still leaves him $7,000 upside down. In other words, he's royally screwed and will learn a very expensive lesson.

Answer 3

Boy do I feel his pain..I am $8,000 up side down in my car...It was a 6 year loan I am 4 years into it and still owe 12 grand...So What I am doing is, doubling up on my parents for 12 months and getting rid of it!! I will then get my honda!! He only has 3 options:

1. Keep the car and pay it off
2. have a HUGE down payment
3. get a car with a good rebate and get a different car..

It sucks!!

Answer 4

Let them repo, but let me explain. The bad history will stay with you for 7 years, but will really only affect you for two years. You do not want to continue paying for that car especially since you are so upside down. After a few months after repo, start contesting your credit report with all three credit bureaus every month to see if the repo can get removed. All it will cost you is 1.23 cents (price for the stamps on the letters). Save the money that you are making toward the payments and buy a car for cash. Obviously it won't be great, but it will be transportation. Once the car is bought, keep saving the payment money into a high yield savings account, such as Capital One's online savings account. You will be suprised how much money will be in there after two years, when the repo (if it is still on there) will not hurt the credit score too bad and you will have a huge cash down payment.

Answer 5

How to get out of Upside Down Car Loan when already behind?

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Answer 6

Amazed that I found this topic already answered! Its like you read my thoughts!

Answer 7

Interesting question!

Answer 8

Auto finance is what I do for a living and there are only so many ways out if you are upside down with bad credit.

1. Keep paying until the wheels fall off.
2. Make a massive down payment.
3. But something even more expensive that will suck up the negative equity.

Since he is not current on his loan now number 3 is out of the question.

The best thing he can do is get current whatever it takes and stay current for 6-months and then trade out of it.

If it repo's, it will do nothing but get a lot worse, they will sell the car for less then it's worth at auction and come after him for the balance plus all fees for towing, storage, auction, interest and lawyers.

If he doe's not pay they can take him to court and get a judgment and then attach bank accounts, garnish wages (if your State allows it) and file liens on any other property he may own like cars, boats, land and homes.

All of this will show on his credit for 7-years making it almost impossible for him to get any other type of loan without making a massive down payment, fees and State maximum interest rates.

Do not let it repo.