Wells Fargo - 722 Redemption or cash-n-drive?

[Clabbergirl]

I've got an '06 Toyota Matrix that I owe approx. $11,000 for, but present value is around $5500. The car payment is $395/month and payments are current. I'm trying to decide what's best - keep making the payment on time and drive the car until it dies, or buy it back from the Trustee for the $5500 difference. If I go with the 722 redemption option, I don't have $5500 cash and would have to finance it at a high interest rate through one of those redemption companies. At first I was against this as I don't want ANY MORE CREDIT. But more consideration is making me think it should be considered.

I'm a single mother, working full-time and currently in a 30 hr/week internship for my degree. I drive an hour away 3 to 4 times per week for this internship. It will end in July, but I will still need to get to work which is about 30 min away daily. So in other words, I need a car, and preferably a dependable one, especially in the short term. The payment is high for me and my budget, and adding a $265/month insurance payment onto it makes the car cost a big one. The insurance includes liability coverage for my 2 teens (16 and 19) on 15+ year old, paid for cars. The car cost is one of the things that lead me into BK, as I could not make it and the house payments both.

If I redeem the car, the payment would have to be much less than it currently is to make it worthwhile. But giving up the car and trying to find something else dependable is a very scary option for me too. Paying while driving after the 7 is discharged would be safest except for the monthly cost.

I'd like to hear from others who may have been faced with this, what their take is on it. What kinds of things do I need to consider given my position?

[HHM]

Redemption is probably a good option. With the savings in principal, even with the higher interest rate, you will almost certainly come out ahead (that is pay less overall for the car). The key to redemption is to not extend the term (time) of the loans. For example, if your current loan only has 36 months left, the redemption loan should be no more than 36 months (preferably, you shorten the term).

[Clabbergirl]

Thanks for the input. I'm leaning in that direction. I hate the idea of having ANY loan once this is all over, but can't have everything. Here's a question - should I keep making my monthly payment to Wells Fargo? Or can I stop paying them right now and then redeem this vehicle without any negative consequences?

[HHM]

You should probably make sure you can get approved for a redemption before stopping payments.

[Clabbergirl]

Doing that now. I doubt I'll be approved through one of them though - they're backed by US Bank and that's one of my creditors listed on the matrix.

[HHM]

Doing that now. I doubt I'll be approved through one of them though - they're backed by US Bank and that's one of my creditors listed on the matrix.

That is a problem. That is the one catch, if you are discharging a US Bank debt of any kind, they won't offer you a redemption loan (seems kinda stupid really, but that seems to be its policy).

[Clabbergirl]

Redemption loan ghost stories?

Thanks, HHM, and it would seem you are correct. I've received nothing back from the company that uses US Bank, but I have received calls back from another company. I just got off the phone with them. I'm meeting with them Thursday, after the 341 unfortunately, to see what their terms are. They did not want to talk terms on the phone which I find irritating, and a bit suspect. But I guess it's really hard to sell 25% interest on an auto unless you're in person and can really turn on the screws?

I hate the idea of having a loan when this is over. Anyone got any nightmare redemption stories they'd like to share?