Car loan advice *Updated with budget*

[ElizabethBennet]

I'm a regular poster on ML, but I need some MM advice.

What is the best way to get out of an upside down car loan? We owe twice as much as we would get for it but I really really want to get rid of this car payment.

We have almost nothing in savings right now. We had a cross country move at the end of last year and with Christmas we were kinda drained. We also just simply spent too much and are paying for it now.

We don't make a lot of money and we are still rebuilding our credit from mistakes in our early twenties.

H has a side business that is picking up, but the income isn't stable. Last month he made $1600 but it is usually about 1k extra. We try to keep our bills and expenses level with what his regular income is.

We should be getting a tax refund but I have no clue what it will be because he made almost 10k total from the side business last year and no taxes were taken out. We should still be getting at least a small refund.

Anyway, do you have any advice for us? We moved from a LCOL (south GA) to a HCOL (northern CA) area and I feel like we are stretched a lot more than we should be.

[makingithappen]

What do you owe on the car, what's it worth, and what's the interest rate? How much money do you have leftover in your budget each month if he just makes 1k? What do you do with the extra on the good months? Is there any way for you to work a side job for extra money? There's no way to get out of the payment besides paying the extra or letting it get repo'd (not my suggestion).

[ElizabethBennet]

Having it repo'd is not an option. We don't make just 1k a month, sorry I wasn't clear. He is military and we are bringing home about 3750 a month. The side business income is on top of that.

We owe about 10k, trade in we could get maybe 5k. The interest rate is 11%. That is after refinancing it from 21%. I told you our credit was bad.

I just need some advice. We should be getting at least a 2200 refund, but probably more when we deduct the business expenses. We have less than 1k in savings now but on good months we try to save the entire amount of the side business.

[ElizabethBennet]

Selling it privately we'd get maybe 7k, if we were lucky. H is really opposed to selling it privately though because of the hassle.

We have one other car with a car payment. I'm planning on going to school soon so I can actually work. Unfortunately, the only job experience I have is as a nanny. It made more money than any other job I could get. I regret doing it that way now though.

[Deleted]

There really isn't any good way out of it, besides buckling down and paying down the loan. You could trade in the car, but they would tack the difference on your new loan, meaning you'd also be upside down on the new car.

[ElizabethBennet]

By the time we get our tax refund and if we buckle down we could have the difference in savings. Should we throw the whole amount at the car and then trade it in for a car around 4k?

This is what I have been thinking of doing but I didn't know if it was the smartest decision.

[lys]

Well, the news is not fun, but can help.
Sell any and all items you are not using nor need. Apply to your car debt. STOP eating out, buying new clothes, gifts, taking vacations. Set up a bare bones budget -- get rid of cable, internet, or at least reduce them - cell phones as well - go to a pay as you go plan etc.
STOP using credit cards to fund your lifestyle.

You will get more for the car by selling yourself than at a car dealership.

It sounds like your 20's - 30's financial choices are still in place if you put Christmas on a credit card.

Read Total Money Makeover by Dave Ramsey.

ANY extra income from gifts, bonuses, tax returns, etc goes to pay down the car - then sell it. Then work on paying off your credit cards.

[makingithappen]

Jan 9, 2013 14:26:02 GMT -5 ElizabethBennet said:

By the time we get our tax refund and if we buckle down we could have the difference in savings. Should we throw the whole amount at the car and then trade it in for a car around 4k?

This is what I have been thinking of doing but I didn't know if it was the smartest decision.

Why don't you get your refund then list the car for sale? If you are able to sell it for 7k, you could get rid of it with the addition of your refund. Selling a car privately is not much of a hassle. Consider it your job that you would get paid 2k for. I understood that you made more than 1k. What do you do with the extra money in the months that he makes more than 1k on his side job?
I'm sure there's a job somewhere that you could get without a degree. Can you make $8/hr somewhere 15 hrs a week while in school? That would net you over $400/month; consider it free groceries every month.

[ElizabethBennet]

Jan 9, 2013 14:35:05 GMT -5 lys said:

Well, the news is not fun, but can help.
Sell any and all items you are not using nor need. Apply to your car debt. STOP eating out, buying new clothes, gifts, taking vacations. Set up a bare bones budget -- get rid of cable, internet, or at least reduce them - cell phones as well - go to a pay as you go plan etc.
STOP using credit cards to fund your lifestyle.

You will get more for the car by selling yourself than at a car dealership.

It sounds like your 20's - 30's financial choices are still in place if you put Christmas on a credit card.

Read Total Money Makeover by Dave Ramsey.

ANY extra income from gifts, bonuses, tax returns, etc goes to pay down the car - then sell it. Then work on paying off your credit cards.

We're on a spending freeze as of Monday. Oh wait, we did go on a date on Monday and used Christmas money.

We have no credit cards except for one secure credit card with a $250 limit that we pay off each month.

Where did you get the idea that Christmas we put on credit cards? We used savings for that. Stupid I know, but I never mentioned credit cards.

We have internet and basic cable that costs $50 a month. Cutting internet is not an option because my husband's business is done online.

[ElizabethBennet]

Jan 9, 2013 14:35:52 GMT -5 makingithappen said:

Jan 9, 2013 14:26:02 GMT -5 ElizabethBennet said:

By the time we get our tax refund and if we buckle down we could have the difference in savings. Should we throw the whole amount at the car and then trade it in for a car around 4k?

This is what I have been thinking of doing but I didn't know if it was the smartest decision.

Why don't you get your refund then list the car for sale? If you are able to sell it for 7k, you could get rid of it with the addition of your refund. Selling a car privately is not much of a hassle. Consider it your job that you would get paid 2k for. I understood that you made more than 1k. What do you do with the extra money in the months that he makes more than 1k on his side job?
I'm sure there's a job somewhere that you could get without a degree. Can you make $8/hr somewhere 15 hrs a week while in school? That would net you over $400/month; consider it free groceries every month.

In good months we try to save the entire amount.

Like I said we just made a cross country move too and that drained us along with Christmas.

We also have a daughter. I'm looking for another job. H's hours change a lot. He's military so it does make it more difficult. I'm NOT making excuses, really. It just adds a wrench in things.

[ElizabethBennet]

Jan 9, 2013 14:42:24 GMT -5 scm1011 said:

I agree that you should try and sell your car privately and use your tax refund to make up the difference. I sold a car privately years ago and it was much less hassle than I anticipated. In your situation, a little inconvenience is definitely worth $2k!

Now to work on H.

But if we sell the car privately we still have to come up with the money for another car, eventually.

[Deleted]

Jan 9, 2013 14:43:46 GMT -5 ElizabethBennet said:

Jan 9, 2013 14:42:24 GMT -5 scm1011 said:

I agree that you should try and sell your car privately and use your tax refund to make up the difference. I sold a car privately years ago and it was much less hassle than I anticipated. In your situation, a little inconvenience is definitely worth $2k!

Now to work on H.

But if we sell the car privately we still have to come up with the money for another car, eventually.

Start saving the payment you're currently making in a "car savings" account every month. Hopefully when you need another car you can pay cash.

[makingithappen]

Jan 9, 2013 14:43:46 GMT -5 ElizabethBennet said:

Jan 9, 2013 14:42:24 GMT -5 scm1011 said:

I agree that you should try and sell your car privately and use your tax refund to make up the difference. I sold a car privately years ago and it was much less hassle than I anticipated. In your situation, a little inconvenience is definitely worth $2k!

Now to work on H.

But if we sell the car privately we still have to come up with the money for another car, eventually.

You'd have to come up with money for the second vehicle either way. Either trade yours and get a loan for the new one or sell yours and get a loan for the new one. I'm pretty sure you'd just meet at the bank that holds your title and each party pays their share. The bank would then release the title to the buyers. You can print a free bill of sale online.
Continue to save the extra money after you get rid of the car to build a baby efund. until then, pay it on the car along with any extra money since the rate is so high.

[ElizabethBennet]

Jan 9, 2013 14:49:09 GMT -5 makingithappen said:

Jan 9, 2013 14:43:46 GMT -5 ElizabethBennet said:

Now to work on H.

But if we sell the car privately we still have to come up with the money for another car, eventually.

You'd have to come up with money for the second vehicle either way. Either trade yours and get a loan for the new one or sell yours and get a loan for the new one. I'm pretty sure you'd just meet at the bank that holds your title and each party pays their share. The bank would then release the title to the buyers. You can print a free bill of sale online.
Continue to save the extra money after you get rid of the car to build a baby efund. until then, pay it on the car along with any extra money since the rate is so high.

The car loan is through USAA, so no physical locations unfortunately.

I'm going to call them and see how the process works for them.

Thanks for the advice guys.

[mrshandy]

Jan 9, 2013 14:42:24 GMT -5 scm1011 said:

I agree that you should try and sell your car privately and use your tax refund to make up the difference. I sold a car privately years ago and it was much less hassle than I anticipated. In your situation, a little inconvenience is definitely worth $2k!

Agree completely. I've bought and sold cars privately. It's a little hassle, but you should check on your DMV's website for more info on how to do it, what paper you need.

[curbsideprophet]

If you post you budget we might be able to help you out more. There are only so many options for the loan. If you can cut back I other area or shift things around you might be able to find more money to put towards the car.

[thegooser]

If you like the car, I would recommend keeping it. 10k is not that much for a good car where you know the history, and it's hard to get a reliable car for super cheap.

I'd take the tax return plus all profits from the side business and pay off the car. If you cut back on luxuries, you can probably just pay it off in about 6 months.

ETA: even if you don't like the car, once you pay it off you can re-evaluate your options and you will be in a much better place to negotiate.

[Roc A Bee]

Can you post your budget so we can give you more ideas?

[ElizabethBennet]

I'll post my budget in a bit. Honestly I don't know where we can cut.

[ElizabethBennet]

.

[ElizabethBennet]

I will probably delete the budget at some point.

[curbsideprophet]

I think your rent is too high for your income. Are you bringing in any money at all? Is a part time job an option? Is moving an option?

What all is included in utilities? Do you need an iphone, it does not sound like it. What does this drop to if you got rid of your iphone?

How much is the second car worth and how much do you owe on that loan?

It also seems like there are a lot of categories missing, which could be why you are going into savings every month.

[ElizabethBennet]

What categories are missing? Moving is not an option right now and we live in a HCOL of living area. Anything cheaper was not in areas that we felt safe being in.

I need to find a job, I know.

Second car is 11k and we owe 13k.

Getting rid of the second car is not an option. It's a prius so we'll keep it for the space and the gas mileage. The other one is a SUV.

I'll look to see what our bill will drop to if I drop the iPhone.

[AAM2012]

Just saw your response, I think you need to find a part time job asap.

Also you are missing categories:
-gifts
-grooming/haircuts
-eating out
-cable (or is that included in utilities)
-clothes
-medical co-pays?

[krystee]

Does his pay include a housing allowance?

Honestly, I would not sell the car. I WOULD sell the other one if it's not upside down.

Let's say you sell it and you net $7K. You owe $3K, plus at LEAST $2K on another car, and a $2K car is going to need a lot of repairs. More realistically, you'd get a $5K car. That means you're paying $8K and getting a cheaper/likely less reliable car to save $2K. Not worth it.

[LoveTrains]

Your rent is way too high for your income. Can you get a cheaper place?

[ElizabethBennet]

Oh I forgot. We have basic cable and internet for $50

[krystee]

If you are in a HCOL area, you could make quite a good monthly income as a nanny, and you could hold out for a family that would let you bring your daughter.

[ElizabethBennet]

Jan 9, 2013 19:41:37 GMT -5 krystee said:

Does his pay include a housing allowance?

Honestly, I would not sell the car. I WOULD sell the other one if it's not upside down.

Let's say you sell it and you net $7K. You owe $3K, plus at LEAST $2K on another car, and a $2K car is going to need a lot of repairs. More realistically, you'd get a $5K car. That means you're paying $8K and getting a cheaper/likely less reliable car to save $2K. Not worth it.

Yes, that includes the housing allowance.

I know we got in over our heads. We were doing great last year and got all excited and spent too much.

[ElizabethBennet]

Jan 9, 2013 19:37:29 GMT -5 AAM2012 said:

Just saw your response, I think you need to find a part time job asap.

Also you are missing categories:
-gifts
-grooming/haircuts
-eating out
-cable (or is that included in utilities)
-clothes
-medical co-pays?

We don't have medical co-pays with our insurance and prescriptions are free.

Any clothes we needed were/are taken out of savings. H cuts his own hair and I just got my haircut for $25 a couple of weeks ago.

This is our spending freeze budget.