Refinance or Sell car???

Question

My friend has a 2004 Acura and is looking to get rid of it because of the extremely high interest rate that they're paying. They owe 21k and the car is worth about 18k. We know it's going to be hard to refi because the amount they owe is more than the worth of the car. Any suggestions on what to do??

Answer 1

TRADE IT IN FOR A CAR THAT CAN CARRY YOUR NEGATIVE EQUITY.

Answer 2

Your friend will have to bite the bullet and pay the difference between what the car is worth and what is owed in order to refinance at a lower rate. Or, if your friend owns a house, he or she can use money from a house refinance to pay off the car. Another possibility is for your friend to make 1 1/2 car payments for a few months to make up the difference between the worth of the car and what is owed. In any case, there is no easy way out unless s/he can sell the car to a private party for the amount that is owed.

Answer 3

It's best to shop around for the best interest rates, then decide from there. I'm guessing that the $21,000 that is still owed is based on the interest rate also, which is really quite a bit for a car that's only worth $18,000. I say have your friend shop around for their best option. Find a dealership that buys back cars and ask them what they'll pay for the car, and also check around with the local banks for a refinance loan. Sometimes the loan is the better option. Negative equity isn't usually a good thing to go unless you're desperate for a different vehicle.

Answer 4

If they pay off the balance, now, they may not actually have to pay the entire 21K. They would be paying 21K if they continued to make payments at the regular schedule, which include a LOT of interest. A pay off would save them quite a bit of interest.

Have them ask the bank what the pay off amount is on the car. They may be pleasantly surprised.