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Old 06-01-2004, 08:43 AM   #1
-=C=-
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Default Getting out of being majorly upside down??

My brother-in-law was wondering how easy it would be to get out of a car loan if he's upside down by almost $5k !!!

He says he owes about 15k on a car that's blue booking at 10k, and wants to trade it in for something really cheap, like $3-4k, and then be upside down in that instead (owing like 8k).

Can he do that? I didn't know what to tell him, I wasn't sure what kind of banks would do that...
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Last edited by -=C=-; 06-01-2004 at 09:03 AM.
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Old 06-01-2004, 08:53 AM   #2
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Sounds like trouble!

There is no easy way. He can't sell it without paying it off. He probably cannot trade it in for even that much (otherwise some dealers will add the difference to the new loan.)

I'm not sure what options he has other than to keep it and pay it down.

Or let it get stolen.
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Old 06-01-2004, 09:05 AM   #3
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He should make extra payments on the car he's got now, until its no longer upside down.

Damn few people will allow someone to owe 250% of the value of a car, which is what you are talking about.

To trade in he'll get less than book for his trade, so figure going into it he'lll have to finance $6K over the value of the car he's getting, for a total of $10K owed on a $4K car. Any bank that would do that loan is begging for trouble or will at least be getting a 20% or greater interest rate.

This is why its important to consider down payments or shorter term financing when buying a car.
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Old 06-01-2004, 09:06 AM   #4
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a friend of mine is in the same boat...

i stress however, this thread is for entertainment purposes only.

http://forums.nasioc.com/forums/show...ighlight=total



edit - if the car is a POS, $5K isn't TOO bad - off the top of my head, if he gets something fairly inexpensive new (not even DIRT cheap, just $15-16K range) and trades into a dealer (assuming the resale is decent and your $5K figure is true), he'll probably be in the hole $24-25K (assuming good credit), to the tune of about $350-370/mo, but for the next 6 years by the time you factor interest/etc.

if the car is a heap and costing him $$ out the butt in repairs, something boring but indestructible like a toyota in that price range might be the way to go if it's a huge headache, but if it's not, i'd just stick it out and pay it off.

Last edited by RaceCarRiot; 06-01-2004 at 09:19 AM.
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Old 06-01-2004, 10:02 AM   #5
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C: no go.

For one, it's a bad idea... people get into this situation, then go for a NEW car and get the new loan to float the difference. The limit to how much you can float depends on your credit, but it's usually 10-20% of the price of the new car.

20% of $3k is $600, so that's no help. No one will give him a loan for $8k on a cheap car, the loan isn't properly colateralized.

He's basically stuck. He can try to get a personal loan to pay off the difference, then sell the car... but usually people just have to keep the car they're making payments on.

Also: he should get gap insurance if he doesn't already have it.
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Old 06-01-2004, 10:06 AM   #6
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I owe, I owe, it's off to debt I go...
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Old 06-01-2004, 10:06 AM   #7
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Also:

RS25 and nunyo, you guys are just rambling on without knowing jack crap about the topic, ain'tcha?

RS: if it gets stolen, the insurance will only cover $10k (the value of the car) unless he has gap insurance, which is extra.

nunyo: it's not "damn hard" to get a 250% loan, it's easy! Just go see Jimmy the Shark... but it better be paid back next week, or Jimmy will break your kneecaps! It's not possible to get a car loan for more than about 125% of the value of the new car, so he'd have to buy a $20k car to have a PRAYER of covering the difference.

That would leave him with a $25k loan on a car that's almost instantly worth $17k. Can we say "worse?" Yeah.
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Old 06-01-2004, 10:24 AM   #8
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I was in the same boat for about 3 years on my RS.

basically, you're stuck when this happens. My only option was to pay it down. I did what was suggested to me by a financial planner. I had 27 payments left at the time, so I made 27 envelopes. I would pay a month off, and the put a payment in enevelope 27. Pay a month, payment in 26. Pay a month, payment in 25... and so on. When I met myself in the middle (My next paymen due was an envelope I had filled) I ended up not only paying off the car, but I saved over $4,450 in interest.

I have been lucky, and I haven't put 65K miles on my 98 yet, it has been maintained meticulously, and it still looks new. The dealer here is willing to give me $6500 for it on a trade. He almost has me biting on a new 2005 Legacy Limited. Unfortunately, it's a Chrysler dealer too, and that 300C on te showroom is mighty nice.

The hard truth is, when you are upside down, it comes down to the fact that in the beginning you took a deal that benefitted the Dealer way more than you. That comes with a price (no pun intended). That price is being upside down on the loan. Just pay it down, on time or early. That's about the only option.
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Old 06-01-2004, 10:24 AM   #9
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If he was buying something that was worth more he might have a better chance. I did something similar with the wife's trade-in, but they wouldn't do it unless we purchased extended warranty, GAP protection, and some insurance. They were basically wanting to make sure they'd make money from other sources in case something happened to the car.
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Old 06-01-2004, 10:33 AM   #10
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Quote:
Originally posted by rogue
Also:

RS25 and nunyo, you guys are just rambling on without knowing jack crap about the topic, ain'tcha?

nunyo: it's not "damn hard" to get a 250% loan, it's easy! Just go see Jimmy the Shark... but it better be paid back next week, or Jimmy will break your kneecaps! It's not possible to get a car loan for more than about 125% of the value of the new car, so he'd have to buy a $20k car to have a PRAYER of covering the difference.


You're just trolling around ain'tcha?

I didn't say damn hard to get, I said damn few people would float that loan. I didn't say that any bank would do the loan either, I said any bank that would, would be asking for trouble or raping him on interest.
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Old 06-01-2004, 11:24 AM   #11
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Quote:
Originally posted by nunyo


You're just trolling around ain'tcha?

I didn't say damn hard to get, I said damn few people would float that loan. I didn't say that any bank would do the loan either, I said any bank that would, would be asking for trouble or raping him on interest.
NO bank would float that loan, not for a car. You're just typing to see your name up on the interweb, I've ranted about this before... if you don't have actual knowledge or something constructive to add, don't post!
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Old 06-01-2004, 11:58 AM   #12
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I rest my case, troll.
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Old 06-01-2004, 12:27 PM   #13
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Quote:
Originally posted by nunyo
I rest my case, troll.
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Old 06-01-2004, 12:41 PM   #14
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I don't care who's been here how long, you are being an ******* Rogue. ...at least I know when I'm doing it.

paying down is the only option. tell this guy to cut his expenses, EVERYONE has some fat to trim, and start paying more on the car.
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Old 06-01-2004, 12:45 PM   #15
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Quote:
Originally posted by ColinL
I don't care who's been here how long, you are being an ******* Rogue. ...at least I know when I'm doing it.
Please, call me Princess

Hey, I may be mean about it, but my numbers are solid. nunyo's going off into left field about 250% loans that "maybe you can't get I dunno" and just taking up space. I speak from experience as a car dealer who went through a hundred different loan scenarios.

I'm just trying to up the signal/noise ratio in here
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Old 06-01-2004, 12:56 PM   #16
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Quote:
Originally posted by rogue
I speak from experience as a car dealer who went through a hundred different loan scenarios.
Well flip you a fish!.

My advice was just like everyone else's, "pay down the current car". I talked about what it might look like if this guy's brother in law was actually able to accomplish what he wanted to do.

The simple fact that its highly unlikely that it could ever happen does not make it an impossibility. If the loan could be made, it'd be done by a very irresponsible financial institution or one that was bordering on usury.

I've been around the credit merry-go-round a few times. I know that if you don't have sufficient collateral (in the form of property or credit) you don't get the loan. One way they adjust for high risk loans is by increasing the interest rate in order to increase their return for the period of time that they actually collect on it.

If you want to talk about other possible solutions to this guy's problem, we can do that, but I don't recall that being asked for. Other possible solutions:
  • Signature loan for amount upside down, then sell the car and buy cheaper car, pay loans separately
  • Home equity loan to pay off car, sell then buy cheaper car
  • A really bad option but a possibility nonetheless, cash advance on credit card for amount upside down by, proceed as with signature loan
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Old 06-01-2004, 01:00 PM   #17
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nunyo: fancy.

Of course, someone said many posts back that he could try to get a personal loan to pay off the difference, then sell the car. Now, who was that...

I'm trying to edjumacate some peeps with some numbers, it seemed like you were just restating what had already been said.
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Old 06-01-2004, 01:06 PM   #18
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Quote:
Originally posted by rogue
Now, who was that...
It was, of course, you. Answering a question that hadn't been asked.
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Old 06-01-2004, 01:08 PM   #19
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Quote:
Originally posted by -=C=-
My brother-in-law was wondering how easy it would be to get out of a car loan if he's upside down by almost $5k !!!
Quote:
Originally posted by nunyo
It was, of course, you. Answering a question that hadn't been asked.
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Old 06-01-2004, 01:08 PM   #20
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Quote:
Originally posted by WRC 3X1
I was in the same boat for about 3 years on my RS.

basically, you're stuck when this happens. My only option was to pay it down. I did what was suggested to me by a financial planner. I had 27 payments left at the time, so I made 27 envelopes. I would pay a month off, and the put a payment in enevelope 27. Pay a month, payment in 26. Pay a month, payment in 25... and so on. When I met myself in the middle (My next paymen due was an envelope I had filled) I ended up not only paying off the car, but I saved over $4,450 in interest.
So you made two payments each time? Or each time you made a payment, you put away for a second payment?
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Old 06-01-2004, 01:13 PM   #21
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Quote:
Originally posted by VanillaEps
So you made two payments each time? Or each time you made a payment, you put away for a second payment?
The way I read it, he put away for a second payment... but it's confusing.

Would make sense to pay double, rather than holding on to cash... that takes principle off the loan and saves you interest.
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Old 06-01-2004, 01:14 PM   #22
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ack what has happened to me, I'm arguin on the intarweb. Time to stop now, you win rogue.
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Old 06-01-2004, 01:19 PM   #23
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Quote:
Originally posted by nunyo
ack what has happened to me, I'm arguin on the intarweb. Time to stop now, you win rogue.
I WIN TEH PRIZE!!!

NOW TEH GIRLZ WILL LOVE MEE!!2
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Old 06-01-2004, 01:22 PM   #24
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Quote:
Originally posted by rogue
The way I read it, he put away for a second payment... but it's confusing.

Would make sense to pay double, rather than holding on to cash... that takes principle off the loan and saves you interest.
or just put it into savings so you don't have all that $$$ laying around.

i get the idea though, it's basically so you're paying double, but have a reserve to fall back on for other things just in case.
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Old 06-01-2004, 01:55 PM   #25
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I just spent the last two weeks trying to do the exact same thing. I was told to lease and then when they tried to run it, they said it was too much to "bury". I tried to buy Domestic even and was willing to totally compromise because I'm trying to reduce debt and my payments...EVERY time I tried I ended with a larger car payment and a long term(72 mos) It's nearly impossible to do it if you want to have a lower car payment or if you want to lease for a short period of time. The only thing that would be a saving grace is if his dealership was willing to basically give the car he's purchasing to him for nothing(rebates, special discounts, etc) A bank won't finance a vehicle for more than it's worth. Also, if he's going for used tell him to forget it....
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