The Question
Getting out of a high rate auto loanGetting out of a high rate auto loan
So, I got myself into a very bad loan on a truck. I was naive and decided to go by myself and buy a truck that was a 2010, very low mileage and good condition. I somehow failed to negotiate or even ask what the payment was going to be just got the credit app back and he said I was accepted, never saying a payment/ interest rate. Was really excited about the truck and my first big purchase. Stuck in a 23% interest rate for four more years since people don’t refinance anything older than 8-10 years, have 15k to pay off, and the truck is worth about 10k. California gas prices are skyrocketing and I have no need for a truck anymore. (Changed jobs). I now have about an hour commute and it just eats gas, so was looking to get a slightly used Corolla, for about 18k. Way better on gas, shouldn’t have problems like my truck has been having, etc. I know I’ll have negative equity but might still be saving money. Gas bill for my truck is like 500 a month, and it would be about 220-250 a month for the car I want. I have much better credit, a 700 currently vs a 500 when I bought the truck a year ago. Want to get out of the insane interest rate. What do you guys think I should do?
You can most definitely refinance that loan! I would start by visiting your local credit union to see what your options are.
Also, please don’t trade in that truck for a Corolla with negative equity! It will bite you – $5000 negative equity on an $18k vehicle is about 28%. We don’t even know what you’ll get in a trade-in; it might be much less than $10k.
If you keep your payments what they are now, you’ll most likely pay off your truck MUCH sooner than four years (rather than four).
We’ve all been there, we’ve all made mistakes like this. Now you know better. When you’re ready to buy a car, I suggest getting a preapproval from a credit union before setting foot inside a dealership. Never negotiate on the monthly payment; always focus on the total cost. Dealerships will hand you a ten-year car note if the payments fit your budget.
My rule of thumb is 36 mo – if you can’t pay off the vehicle in 3 years, you can’t afford it. 🙂
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