59 of 72 payments later - Keep it sell it what?

[notavictim]

Circling back to the forum almost 8 yrs post BK. I've got 1.3 year left on this auto loan note. Bought a 2008 4Runner back in 2010. It has been great and could last for many more years. Problem is I've just never had such a large car payment for seemingly forever. I want it to be gone. What are my options?

I still owe $6600 - BBnow values it at $16K private party $14K trade in.

If I had had stellar credit back in 2010 I could have paid a total of $29K. But due to the BK I have paid 11% interest rate and a total of $36K ouch. Of course, now it is all principle payments. And the whole thing was to help rebuild my credit - which it has.

I see a couple options -

Drive it for years until the wheels fall off and try to get my money out of it that way. Or, sell it, pay off the remaining loan and make back the $7000 I overpaid in high interest. Roll that into a new car and cross fingers that my credit history 8 yrs post BK is lots better and will afford me a better rate.

Thoughts?

[Drazil65]

option 3: save the cash and pay it off! $6600 is not a lot of money and hopefully you now have your financial life under control and save on a regular basis. That car should last a good many yrs so once that $6600 is paid off you are car payment free. Why start that hamster wheel of another round of car payments? 5 or 6 more yrs of it (unless you can pay more than 50% down and take a 36 month or less loan).

Hopefully the one thing you learned from your bankruptcy is not to live on credit or depend on your credit score to rule your life, cash is king so save what you need and pay it off, best option you have!

[notavictim]

Thanks - I like option #3. Question though - what are the pros of paying it off vs. simply paying the remaining 13 months of what is basically principle? Certainly the monthly cash flow increase would be nice. Really nice actually. But then you lose some savings.

[LadyInTheRed]

If you pay it off, you will no longer have a seemingly endless car payment and if you have a decrease in income in the next 1.3 years, you won't have to worry about a car payment.

[TXskyblue]

I think buying a new car is a bad idea. Why go into debt for a vehicle when your current vehicle is fine?

You have good equity in it. Yes, it sucks that you paid so much interest but selling it today will not change that one bit.

Paying it off sounds nice, but would you have to dip into the emergency fund to do that? $6,600 would put a serious dent in most people's emergency funds.

I think I'd keep paying it every month until the payoff is low enough that I could knock it out without robbing the emergency fund.

You mention considering the credit score impact. What is good for your credit score is often not what is good for your wallet. The best course of action for your credit report it to pay it off over the full term. Paid off installment loans are not as good on a report as an aged and still paying on time installment loan.

If you really want to get into debt for a new vehicle, I'd say keep your current vehicle for another 2 years until your BK falls off your credit report. You will get the best rates.

[notavictim]

Yeah right on. I'm going to keep it and pay it off monthly. The whole point of buying the 4Runner in the first place was knowing I was going to get soaked on the interest but also knowing the SUV could be counted on to hold its value and be reliable for a long time. Hard not to get into that car buying mood every year or so.

[Drazil65]

Great decision and you will be so happy that you took the time to rethink the whole "new car" thing. Its all part of the process of getting into a new mindset and attitude, with that kind of thinking comes great stress relief in the long run. Keep life simple and live within your means (below), when you don't have financial stress you have a brand new life.

[TXskyblue]

Yeah right on. I'm going to keep it and pay it off monthly. The whole point of buying the 4Runner in the first place was knowing I was going to get soaked on the interest but also knowing the SUV could be counted on to hold its value and be reliable for a long time. Hard not to get into that car buying mood every year or so.

I can relate. I periodically try to talk myself into trading my fuel efficient, reliable car for a truck. Luckily, my rational side does the math and realizes what a poor decision that would be for me.