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  #1  
Old 09-29-2010, 08:50 PM
forS forS is offline
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Default Sell car to pay debt?

I am writing on behalf of my long-term girlfriend who is disabled and unable to manage her finances so I am helping her at this time. I've very little experience with debt so help would be appreciated.

She has been living beyond her means (greater expenses than income).
Most of her debt has been consolidated and she is using strategy 3 (see David's post in Strategy to Eliminate Debt). Student loans are on temporary forgiveness (though interest is accruing).

Her new vehicle is well beyond her means to afford. It's bought on credit at 25k. 5k has been paid. 20k is owing. Sale value is 13k. She cannot afford the monthly payments. She does not require the car for work. Her net worth is well into the red.

My thought is to sell the car. Yes, she'd still have 7k owing. But she would finally be able to make her minimum debt payments and then some. Less interest would be accrued. The car is a sitting duck eating her money.

We looked into leasing but that's not an option (since it's a purchase). The other option is for someone to take over the loan (I'm researching that now). But for speed and to cut losses, selling seems to be the way.

Best options?

Thanks
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  #2  
Old 09-30-2010, 10:02 AM
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DavidBibby DavidBibby is offline
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Default Re: Sell car to pay debt?

forS,

Thanks for the mention regarding my other post.

The way I see it, selling the car IS your best option. Nobody is going to take over a loan for $20k for a car worth $13k. Funny how people will do that from the dealership...but won't to that when a car goes from one PERSON to another.

However... if you sold the car for $13k and put it toward the loan.. you could then put the $7k into strategy #3 like you were doing before.

How much will the dealership take it back for, if you couldn't find a buyer.

How you actually SELL a car you are upside down on??

This article on MSN money might help you do that.

Liz Pulliam Weston: Selling a car you don't own free and clear - MSN Money

Wish I could help you more!

David
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Old 10-01-2010, 01:38 AM
forS forS is offline
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Default Re: Sell car to pay debt?

David,

Thank you for your feedback. It turns out:

Creditor needs FULL amount of 20k to release title of car. Gf doesn't have it.

Therefore:
Private sale - Long shot. It's unlikely someone is going to pay 20k for a 13k car.

Loan takeover - Long shot. Loan is transferable but title is not until fully paid off. Also, if payments are missed my gf is liable. Like you said, unlikely.

Dealership - won't work. They will buy at lower price, but my gf still owes creditor who will not release title unless full 20k is paid.

Creative brainstorming?

I'm going to have the car appraised at the dealership and see if I can get it traded for the cheapest car they've got (3k) and roll over the debt. It will at least reduce my gf's debt by a hopefully some thousands. So the creditor wants 20k. She can trade in her car for a 3k car and she'll owe the creditor 3k plus the difference left on the traded one. I.e. if they buy it at 9k, she'll now owe the creditor 11k+3k. She'll reduce her debt by 6k.

She is looking at family for loans as well as other sources to pay off the creditor. Long shot too but trying.

If anyone else has any other ideas that would be great. We've already reduced her spending to the bare minimum and I'm also partially supporting her to help. She's also educating herself financially to better manage this situation. I hope that the dealership idea works. If not, I know there's always a way - just trying to find out what way that is.

Any feedback is appreciated!
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Old 10-10-2010, 12:35 AM
Nick Nick is offline
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Default Re: Sell car to pay debt?

yes if someone will take over the loan, give it to them for god sake! Kick in $50 on the payments if thats what it takes to get it off your back if it is not being driven.
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Old 10-11-2010, 01:04 AM
Jacob Jacob is offline
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Default Re: Sell car to pay debt?

There's no way the dealership will let you roll it on top of their cheapest car because no bank is going to finance $14000 on a car thats only worth $3000. She either needs to cut other things in her life and make the payment, or let it get repossessed.
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Old 10-13-2010, 11:52 PM
forS forS is offline
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Default Re: Sell car to pay debt?

Thanks for the feedback.

So the lender (creditor of loan) requires full payment of remaining 20k to release the title. Here's our solution:

1. Sell car at highest value possible - between 13k-15k (turns out it's worth then we thought)
2. She's borrowing the remainder from her mom.
3. Total $ will go to creditor who will release title of car for new owner.

She's already cut down on expenses (only rent and work necessities, groceries). She's now simply paying for the consequences of bad money management of the past

I'll look into your other suggestion Nick. As David said, one will take over the full 20k loan on a 13k car. But if she can borrow 7k from her mom to just pay off a large chunk of the loan, maybe someone will take it over at the lesser amount. The loan is transferable, but my gf's name would still be on it with the new signer, which makes her liable if the new person payments.

We've got the car up for sale now. Anyone interested in a 2009 VW Rabbit with a 6 year warranty?

We're also looking into a pro-rated refund for the warranty...
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Old 10-14-2010, 09:36 AM
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DavidBibby DavidBibby is offline
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Default Re: Sell car to pay debt?

Make sure that your GF's name is NOT on the new loan. Whomever buys the car from you at $13k should have his OWN loan.

The last thing you want to have sold the car, and find out two years later that the bank is coming after your GF because the other guys never made a payment.

If the buyer cannot qualify for his/her own loan...do not sell the car to them.

If at all possible... find a CASH buyer.
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Old 10-18-2010, 01:41 AM
forS forS is offline
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Default Re: Sell car to pay debt?

Quote:
Originally Posted by DavidBibby View Post
Make sure that your GF's name is NOT on the new loan. Whomever buys the car from you at $13k should have his OWN loan.

The last thing you want to have sold the car, and find out two years later that the bank is coming after your GF because the other guys never made a payment.

If the buyer cannot qualify for his/her own loan...do not sell the car to them.

If at all possible... find a CASH buyer.
David - thanks again for your helpful advice We will not be opting for a loan take-over that has her name still on it. You are right, it's too risky.

This week plans:

Plan A:
Sell car to buyer with cash in hand to creditor. Any remaining debt owed on the car will be paid by her mom. Title goes to buyer immediately. Gf will owe money to her mom.

If no one buys car...

Plan B:
Sell car to dealer. Any remaining debt owed on car will be paid by her mom and by someone else (looking for other sources... it may possibly be me... but this is a great strain). Gf will owe her mom and me! Title goes to dealer.

She MUST sell her car if she is to get out of debt. I'm doing my best to help her on this and other financial fronts. Will let everyone know what happens. Thanks for everyone's support. It's appreciated when things feel so hard.
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Old 10-19-2010, 02:19 PM
debtsett debtsett is offline
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Default Re: Sell car to pay debt?

get some payday loan
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Old 10-20-2010, 05:22 AM
forS forS is offline
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Default Re: Sell car to pay debt?

Quote:
Originally Posted by forS View Post
This week plans:

Plan A:
Sell car to buyer with cash in hand to creditor. Any remaining debt owed on the car will be paid by her mom. Title goes to buyer immediately. Gf will owe money to her mom.

If no one buys car...

Plan B:
Sell car to dealer. Any remaining debt owed on car will be paid by her mom and by someone else (looking for other sources... it may possibly be me... but this is a great strain). Gf will owe her mom and me! Title goes to dealer.
I've found a buyer. Hit a glitch. The buyer lives in our neighborhood, has an approved loan, but lender won't send the money unless the title is also in this state's DMV. My GF's lien holder has the title but the title is registered in another state (the location of the lien holder)! I've called to have the title transferred but this could take up to three weeks. The buyer actually seems sincerely interested in the car and can wait for that time period. I have a friend (a car dealer) who gave me the contracts to assure payment deposit etc. from the buyer until the title arrives. Once the title is transferred to to our location, lender will release money to my GF's lien holder in the other state, and new name can be put on the title.

The buyer may be able to bring cash (instead of loan) and is looking into it. However, they'll still have to wait to get the title from my GF's lien holder. We'd have to put together a bill of sale assuring they have the title once we know the money has been received and then hand over the keys.

If for some reason this falls through or if it seems like too much trouble, then we also found another buyer who can pay cash. They are offering less, but at least the pay-off is immediate. They are also willing to wait for the title but will credit the money right away so they can have the keys.

I'm learning a lot from this process, but it's been a headache of phone calls and sorting papers. I'm tempted just to give it to the dealer and if this doesn't get resolved soon, and we may just do that. It's less money, but it's less headache too.

Will report back - fingers crossed this is a done deal by Friday.
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  #11  
Old 10-20-2010, 11:39 AM
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DavidBibby DavidBibby is offline
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Default Re: Sell car to pay debt?

You're doing great forS!

While this is a learning experience for you, it is making you a wiser person overall.

I'm sure your GF appreciates you handling this for her.

Hope to hear the great news soons!
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Old 10-23-2010, 02:46 AM
forS forS is offline
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Default Re: Sell car to pay debt?

Woo hoo! Thank god it's over.

It's been one heck of a learning experience. I've never had much debt to deal with and because I save and spend well, I figured I was smart with money. And I am, but I didn't realize that an important piece to my education is actually learning how to manage severe debt! I've come away richer in more ways than one!

So my gf's car got sold to the dealer yesterday (official Fedex to the lien holder today).

1. Buyer with Loan
We didn't go with the buyer with the loan - too much hassle and no guarantee that they would hold their word (even though they really do seem sincere) because they couldn't put down a cash deposit for us to hold the car until the loan could come through after Title transfer to our State. And so it's no guarantee for them either that we couldn't sell it to someone else (though they trust us to hold it anyway and we would). But if we went this route, we would want a deposit and promissory note/bill of sale with balance due.

2. Buyer with cash
Also too much hassle in THIS case. It still meant waiting 4-6 weeks for title transfers. My gf's lien holder is in another state, as is the title. So no matter what, lots of waiting, calls, follow-up and paperwork. Also, she would have to continue making payments on the car and insurance until the title got here or moved to her name. Even though it would take only 48-72 hours to put in her name after the payment is received, the new owner would not be able to receive their title for another three weeks because of slow processing and mail. So even with the cash buyer, she would have lost a bit more money from payments to insurance etc. and the buyer would have to wait as well.

3. Dealer
We sold it for $1000 less than what we would have gotten if we went with the cash buyer. BUT - it was worth it. We found an excellent dealer willing to pay MUCH more than the other dealers. No hassle, they do all the paperwork, we walk away never to speak to them again unless necessary (unlikely). My gf now owes me and her mom some money, but with a warranty refund of nearly $2000 that will cover some of this.

For those of you with extended warranties - refund them if you are selling your car!!! Get your money back!

I lost a lot of work hours trying to sort out all this, but got an education. I still have to sort my gf's student loan (another thread!) and her consolidated debts, but she's in much better shape now and I'm more knowledgeable.

Thanks David and everyone else for reading and advice and support! It made a huge difference to have your help
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