Car loan-722? Any input on 722 redemption?

[ccsjoe]

I was answering a post in the repossession section about an auto loan (http://www.bkforum.com/showthread.ph...lateralization) and this 722 redemption talk came up. I had recently also received a flyer in the mail about this 722 redemption thing, where they assure they are an alternative to a reaff. Being me, I emailed my attorney inquiring about this as an alternative to us (we are doing a reaff with Ford) and he readily admitted having heard about it but never having done one. Does anybody here know how this works, what happens to the settled balance, etc?

Thank you

[ccsjoe]

Bump

[backtoschool]

A 722 redemption supposedly allows you to cram down your car loan to what the market price of the car is. It's good for cars that are underwater a great deal. A 722 also allows you to have a positive trade line reporting to the credit bureaus post bk. A 722 redemption loan will report to the credit bureaus. This is better than keeping the car and not reaffirming, although reaffirming the car should also report to the bureaus.

Sometimes the interest charged on 722 redemption loans is really high though. Ymmv of course. If you are not underwater and have a relatively decent interest rate on the car, 722 redemption probably isn't going to help you much.

[ccsjoe]

Once again, thanks B2S. I'm going to talk with them today, but from what I gather, they will not be an avenue for me..one of my lawyer's associates calls the rates he's seen almost predatory. Bottom line I'm a bit upside down on the car, but that won't be enough for the difference between the 5.9% I have now to their high 20's or whatever. We'll see what they say, but thanks for the input.

[HHM]

Redemption works if you are already WAY upside down in value and have a somewhat high interest rate already. But, there is more to the deal than interest rate. The 722 redemptions that I have seen do actually put the debtor in a better position with the car, the reduction in principal more than makes up for the higher interest rate of the redemption loan. Over the life of the loan, the debtor pays less to pay off the car.

You just have to run the math. I have a few examples floating around in the different threads on this issue.

[ccsjoe]

Thanks HHM. That's what I intend to do after talking with them, run the numbers. Doubt it'll work for me, but we'll see.

[ccsjoe]

And the result on 722redemption.com is:

I have a 2010 Ford purchased in february with no down at a 5.9% with full maintenance plan and extended warranty thrown in to 75K miles. Right now, my monthly payments are 519. The difference between loan outstanding and KBB private party (good condition) value is approx 8.5K.

I called this company to explore the option. What they do is they will offer your creditor KBB private party fair condition value on your car and "hope" they'll agree to settle for that. In my case, this created a differential of about 10.5K between outstanding loan amount and the "fair market value" they used.

Their base (starting) interest rates are in the high 20's. They do not determine your minimum rate by your credit report or score. Once you apply, if you have a history of car payment problems, repo's, etc, they may actually raise your rate beyond high 20's, but never lower.

Given the above, the best they were able to come up with for me was monthly payments in the amount of 569, so effectively higher than what I'm paying now. The 10.5K loan amount difference was not enough to offset the jump in interest rate from 5.9 to high 20's. Even their rep, who gets paid to make the sales, told me in my case it was not an advantage and that I was better of with a reaff.

You have to be extremely upside down on your loan and/or have an already high interest rate to begin with in order for this to really be an option for you beyond reaff or surrender.

Footnote: If you lender does not agree to settle for the reduced value they offer, they also offer a myriad of previously owned vehicles at "wholesale" prices so that you can purchase a vehicle if you need to surrender yours. Again, the interest rates make it a no go for me, but someone else may make sense for someone else.

Cheers.