What should I do? I’m at a total loss.

Submitted by TheChef69420 t3_10qco5g in personalfinance

I’m a 21 year old male who makes around 33,000 a year. Back when I was 19, I made a horrible choice and got my first car (2006 Mustang GT) at an unbelievable interest rate of 28%. I could barely afford the payment so unknowingly got the lowest insurance I could which was liability.

I didn’t know what it meant, and I bet you can guess what happened next. I totaled the mustang. Complete loss, not even much to part out. Now paying a car off I don’t even own, I decided to get another stupid car. A 2006 350z, I have full coverage now, but still pay 22% interest.

I am paying over $700 a month in car payments, one for a car I don’t even own. I hate the 350z with everything in me. It’s uncomfortable, high mileage, and unsafe during winter months. I have about $13,000 left combined for both cars.

I want/need a car that’s just a safe daily, a truck or something. My credit is good now, in the 700s but I’m so deep in the hole.

Should I get a personal loan? Combine both car payments together with a hopefully smaller interest rate? Refinance?

I know I’m stupid. Terribly terribly stupid, just need some advice.

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breaktime1 t1_j6pep9v wrote

Is there reliable bus service in your area you can use while you pay off the mustang?

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randomuser419 t1_j6pgcmg wrote

Sell 350z and pay off mustang debt, use public transport until you're done with payments. If you absolutely need a car, sell the 350z for a same year Civic or Corolla.

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1955photo t1_j6pguhz wrote

Can you get enough out of the 350Z to pay off the loan?

At least with a new loan you could get a better interest rate. And also look for something inexpensive. You don't need a truck. You need practical wheels to get from point A to point B. Look for a small 4 door car.

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greyAbbot t1_j6ph564 wrote

First of all, stop beating yourself up about this. It doesn't help, and the "everything I do is wrong, so it doesn't matter what I do" mentality often leads to more bad decisions. You're only 21; we've all made dumb mistakes and if you learn your lesson about not buying cars you can't afford at 21 (and you definitely can't afford a car that you can only buy with 22%, never mind 28% interest), you learned this lesson cheaply.

So, no, don't get another car right now if at all possible. You're already paying off two car loans, and you don't want to be paying 3. If you could even get a car loan, you'd get another high-interest loan because the lender would (reasonably) want to be compensated for the high risk that you wouldn't be able to keep up with the payments and default.

And you could look into personal loans or refinancing, but you're likely to run into the same problem that you're going to look like a default risk. But if you can get a better rate (like at a credit union), then go for it.

But you are NOT going to borrow your way out of debt, so the loan restructuring is not the solution. What you need is a (possibly temporary) infusion of extra income. If you can get overtime where you work, great. If not, you're going to need to get a second job. The faster you can pay these loans off, the less it matters what the interest rate is. Right now you're paying $3000+ of your $8500 in annual car payments to interest, which means it's going to take you two years to pay them off. If you could add another $400 a month to that, it would only take you 14 months; if you could add $1000, it would only take you 9 months. Can you figure out how to add $100/week?

Normally at this point I would say "delivering pizzas", but that doesn't seem like a great option for someone with a totaled car in their recent history. And most regular insurance doesn't cover accidents while driving for work (State Farm is an exception). But I'd really start looking for something. If you can temporarily boost your income (and/or cut expenses), you can get this behind you a lot sooner. And if you can keep it going for a while, you can add to the down payment and get a more reliable car, as well as building up an emergency fund so that any future events don't become crises that send you spiraling again.

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