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Scott,
My
son purchased a car for $15,000 at a high rate of interest. He's
been paying for 32 months and he still owes $11,000. He has just
been laid off and to top it off the car has blown the engine. I
would like to help him pay the loan off to keep his credit rating
but would like to negotiate the amount down. What are the chances?
Would he be better off to let it be repossessed? This would be to
nobody's advantage. Please advise.
--Jim
Jim,
Thanks for writing!
The good news, certainly for your son,
is that you're willing to help him. And because of that you'll be able to save him some money and keep his
credit history clean. Since your son probably has your character,
it's a good bet that he'd make sure to repay you when he's
back on his feet.
Here are a few ideas to save money,
while helping your son at the same time:
1) Buy the car from your
son.
Since you are willing to help out financially, you may
be able to save money by buying the car from him. That's because you're
more likely to be able to get a better rate on a loan for
the car.
Check with your credit union or local
bank and find out what the deal is for used car loans.  The bank will
loan you an amount based on the book value of the car, but the rate
will most likely be far less than the current rate.
If you cannot get the full $11,000
needed to pay off the original amount you may want to consider using
a credit card cash advance if the rate is low. Call your credit card
bank and see what they have to offer. Tell them that if they give
you a good deal you'll use their line of credit otherwise you'll be
calling your other credit cards to see who wants to make a profit.
Or, if you have a low rate transfer offer on one of your credit
cards, you could cash advance one credit card and immediately
transfer the balance to the lower rate card.
So between the bank loan and other
financing you can take possession of the car and save money over the
current financing.
2) Fix the car.
The car is still worth quite a bit of money. Replace or repair
the engine and keep track of that cost.
3) To sell or not to sell.
At this point you have a functioning car that's been refinanced at
a lower rate. Your son's credit history looks good because the car
has been paid off. Now the question is, "Will your son want the
car when he gets on his feet or will he want a less expensive
vehicle?"
If he wants to keep the car, then you
could sell it back to him for the unpaid balance plus the cost of
repairs. Or he could pay you monthly for all the financing.
If he doesn't want to keep the car
then sell it. Take that money and pay off as much of the financing as
possible. You may not get enough from the sale to repay the entire
amount. In that case you'd need to work out how that difference
would be paid.
As far as negotiating the amount
goes, it's always worth it to give the lender a call and see if
they'll reduce the balance. However, in this case, I believe the
chances are slim.
The above suggestions are the ideas I
would consider. I hope you find them useful.
Good luck and please let me know what
happens!
Regards,
Scott
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