Credit Advice

Have a question? Have advice to share? The combined knowledge and experience of everyone in the Credit Karma community can help you. Enter your question or help others below to get started!

Question

Posted in Auto Loans
Profile Image

Question By
WhatScreenNameIsNotInUse

1 Contribution
0 People Helped
$4k upside down trade-in vs voluntary repo
Three years ago, my boyfriend had a vehicle get repossessed. He only had one credit card as a "revolving account" since. One year ago, he got a vehicle with an insanely high interest rate. Unfortunately, the shady dealership sold him a vehicle for twice what it was worth. Due to the high interest rate, he has barely been able to pay towards any of the principal, so he owes $4k more than the vehicle is worth now. Recently, the vehicle began breaking down & the repair bills are eating his lunch & making it hard to pay the loan. He tried to trade -in the vehicle, but since he is $4k upsidedown, it is just about impossible. He's considering a voluntary repossession, before it comes to the point that it gets repossessed due to not being able to pay the loan due to the repair bill being more than he can afford. If he chooses this route, he is going to get a brand new vehicle (with factory warranty) before the repossession is done. Since he will already have a new loan in place, along with a good "revolving account", how terribly will this affect his credit score? Any help &/or advice is greatly appreciated. Thanks in advance!

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW
All Responses

Result 1-1 of 1Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next
Top Contributor
5038 Contributions
1134 People Helped

Repos can be pretty harmful to a credit profile. It will cause significant damage for years to come. I guess if he can secure his new loan and doesn't want to get credit for years to come, he could do his plan. But he should keep in mind that life is ever changing and just because he doesn't care about damaging his credit score today, he may wish he didn't 2 or 3 years down the road if he is need of financing something. There are most likely better ways to tackle this problem. If he could come up with 4k to cover the difference on what the vehicle is worth and sell the vehicle outright rather than trading it, he could possibly dig himself out of this mess without severly damaging his credit. Also keep in mind if it is 4k underwater on trade in value it is no where near 4k underwater on selling outright, dealers always stiff you on trade in value as do the blue books and such.

Result 1-1 of 1Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

SIGN UP NOW

Reply to this Question

Write your response:
Enter Your Comments

The Credit Advice pages of the Site may contain messages submitted by users over whom Credit Karma has no control. Credit Karma cannot guarantee the accuracy, integrity or quality of any such messages. Some users may post messages that are misleading, untrue or offensive. You must bear all risk associated with your use of the Credit Advice pages and should not rely on messages in making (or refraining from making) any specific financial or other decisions.