So they borrow the 2 grand they need in order to make up the difference to the bank. A $2,000 short term debt beats the hell out of a $9,000 long term debt. I would think that their bank would be willing make this happen, since it would be in their best interest, too.
Never happen HTG.
You have a couple here, 2 years out of the Chapter 7, no credit score, and the repo truck is following them around waiting for the phone call.
The banks is going to release their collateral and make an unsecured loan for the balance due?
Even the shark lenders won't make that one.
If I'm the banker, my best bet is repo the car, sell it at auction and hope for an agreed judgement with voluntary wage garnishment.
These folks best bet is to cut costs, work
both their tails off, and get the car paid down enough to sell their way out of it, then start hammering the other debts.
If this couple is indeed a huge credit risk, then bank should be pleased to replace it's $9,000 high risk, long term loan with a $2,000 lower risk, short term loan. The new $2,000 loan wouldn't be unsecured, it just wouldn't be secured by that particular Pontiac. The bank would be reducing, not increasing, the amount of credit extended to the couple, and that's a good thing from the bank's perspective.
Saving up the $2,000 needed to make the sale would work, and might be the only option if their bank won't cooperate. But it would take a lot longer and cost a lot more. They'll only be able to put whatever money they have left after servicing their $9,000 debt each month into their saving. They'll also have to cover the additional interest on the $9,000 debt, which increases the time it wil take them to pay off the big debt as well as the time it takes them to save up the $2,000 they need to sell the car.
If they borrow the $2,000 first, they'll be able to pay it off with the money they used to spend on car payments for the Pontiac, plus whatever they can scrape together. They'll pay much less in interest as well. This plan essentially allows the couple to pay off $7,000 of their debt immediately, and pay off the remainder under much more attractive circumstances. This is one of those few instances where a little bit of credit is a good thing.
Don't get me wrong. The couple needs to cut costs and work their tail off regardless of what they end up deciding. But I think their hard work will pay off faster by borrowing $2,000 and selling the car today.
They didn't. They've owned the van and the pickup for years, free & clear. Sorry if I was less than clear on that.
My mistake. Either way, it appears that they can't afford the Pointiac and probably shouldn't have purchased it in the first place. Best thing to do is to eliminate the liability as quickly and affordably as possible. Repo sale may be quick, but won't do as much to eliminate their liability since the repo sale won't bring in the car's full value.
