Horrible 18% interest Auto Loan with HSBC

[timetofixcredit]

Here is the quick and dirty:

Bought a car in 06 for 10.5k at 18% interest. I have tried my damnest to pay it down, and then essentially realized I was on a debt treadmill. I have $4,500 to pay on the loan, and I have already paid 10k. I feel like a complete idiot for having gotten myself into this loan in the first place. My credit score is under 600. Is there anyway to get out of this awful loan and stop giving them all of my money ? Any suggestions will help. I think the option are re-financing (poor credit though), turning the car in and using that money to pay off the loan (then i would need to get a cheap car or try to get a better loan) trying to pay down the loan as quickly as possible (either way i'm paying at an 18% interest rate). Any ideas ? Gracias

[jq26]

Bought a car in 06 for 10.5k at 18% interest. I have tried my damnest to pay it down, and then essentially realized I was on a debt treadmill. I have $4,500 to pay on the loan, and I have already paid 10k. I feel like a complete idiot for having gotten myself into this loan in the first place. My credit score is under 600. Is there anyway to get out of this awful loan and stop giving them all of my money ? Any suggestions will help. I think the option are re-financing (poor credit though), turning the car in and using that money to pay off the loan (then i would need to get a cheap car or try to get a better loan) trying to pay down the loan as quickly as possible (either way i'm paying at an 18% interest rate). Any ideas ? Gracias

First off, forget about the $10k you already paid. That went mostly to interest. It is gone. You were "mostly a renter" on the car due to the interest rate you agreed to.

Second, you need to know what the car is worth. You might be upside down on the car by now which could be a problem.

Third, now that you have $4500, pay down the car note. You are removing $4500 of debt that is accruing interest at 18%. Which means three things:

1) your total debt on the car just shrunk by almost 50%, increasing your FICO score.

2) if you don't refi, every payment going forward goes much more towards principal and less towards interest, since you owe much less money.

3) if you do refi, then you'll have to pay the old lender off with a much smaller check, and your scores will be higher so your new lender may give you a better rate.

What do you mean by turning the car in? You own it, right?

[timetofixcredit]

Yes, I am financing the car. It is a Nissan Maxima 2001 with 100k miles in decent condition. I would estimate that it is worth about 4-5k. So you would recommend paying down what I owe as quickly as possible?

[jq26]

Okay, so you own it. There is noone to turn it into unless you plan on defaulting and nuking your credit.

Pay it down or Refi it. But either way, make the lump sum payment. For the reasons listed above. You are both severely decreasing the interest portion of each payment going forward (if no refi), and raising your FICO & lowering your total debt owed on the car (positive for refi).

So, make a lump sum payment, wait 45 days, then try to refi this thing. If no luck, make another lump sum payment with your tax rebate coming in May. After that payment, your balance will be next to nothing.

[AboveAverage]

I have a couple of questions.

1) What are your regular payments? (The amount you have to pay monthly.) When was the start date you started in '06 for the loan?

2) What is your balance left on the loan? (Before you drop the $4500)

3) Have you EVER been late on the loan?

[timetofixcredit]

1) my monthly payment is $274, I began paying on this loan in February of 05' (sorry I had initially put 06', even worse)

2) My balance on the loan is $4,607

3) I have only been late twice, more than 8 months ago.

thanks

[thomassl]

I had a car loan with HSBC as well on which I paid for 1 1/2 yrs. at 16% interest. I worked delingently to increase my credit score during this period cleaning my credit report and making sure it stayed that way. When I wanted to refinance with them, I was told that they do not refinance their own loans! I have been paying on time and was an excellent client! When I learned this, the person on the phone told me that they would be willing to finance another vehicle through them at a lower interest rate if I qualified. Well, I did and got a 9% interest rate! They sent me a check for $24,000 to obtain another vehicle. I took this check and went car shopping as my vehicle was getting older also. I did find the vehicle I wanted at a Toyota dealer who offered me an interest rate of 1% lower to finance with them! I got my vehicle, tore up the check from HSBC and have never been happier!

[jq26]

2) My balance on the loan is $4,607

No brainer. Pay the loan OFF then. Problem solved. There is nothing good that can ever come from having debt at 18%. Not tax deductible debt, and certainly not non-deductible debt like car loans and credit cards.

Assuming you're in a 15% marginal tax bracket, you'd need to invest the money at a 22.2% yield WITH NO RISK for it to be worth not to pay off your car loan. Since you can't even buy junk bonds with that kind yield, there is only one good option. Pay it off.

And then be happy that your car now has a 0% loan with a $0 monthly payment.

[AboveAverage]

No brainer. Pay the loan OFF then. Problem solved. There is nothing good that can ever come from having debt at 18%. Not tax deductible debt, and certainly not non-deductible debt like car loans and credit cards.

Assuming you're in a 15% marginal tax bracket, you'd need to invest the money at a 22.2% yield WITH NO RISK for it to be worth not to pay off your car loan. Since you can't even buy junk bonds with that kind yield, there is only one good option. Pay it off.

And then be happy that your car now has a 0% loan with a $0 monthly payment.

Ditto....To the OP: just pay the damned thing off and be done with it. $4500 plus your payment equals paid off car. Then this isn't even a topic for discussion. Once the loan is paid, see if you can find some GW letters and write to HSBC to see about removing those lates...might help with your score.

[CleverCynic]

No brainer. Pay the loan OFF then.

re-read his initial post.... he has 4500 LEFT on the loan... he doesn't HAVE $4500.

[AboveAverage]

I have $4,500 to pay on the loan, and I have already paid 10k.

I understood that to mean he has the $4500 to pay on the loan. Sometimes I do read these posts quickly and might lose some comprehension, but I comprehended that he has the $4500 as per that original quote in the initial post.....

But honestly, if CleverCynic is right, shoot man, I don't know what the situation is. Everyone's financial situation is different.

Maybe you have a couple of kids, other financial obligations, etc., but $4500 on a loan can be done in one year. If you have a tax refund coming, then you have a rebate coming to you later. F--- what you thought you needed to spend on that refund/rebate, and put it toward the note. Your credit is already jacked up, and jacking it up even more is not going to help you...unless of course, you were going the Bankruptcy route. I wouldn't personally do it, but I have read it has helped others here. Good luck and please let us know what you help you need.

[jq26]

re-read his initial post.... he has 4500 LEFT on the loan... he doesn't HAVE $4500.

Looks you are right. He said "I have $4500 to pay on the loan..." Just a misinterpretation.

OP: Refi the loan if you can. No one should pay 18%. If you can't refi, then pay down the loan as quickly as you can (ie: make extra payments when a little bit of free cash comes available). Every little bit that you put toward the loan helps reduce the amount of interest you are paying going forward.

Other than that, you could always sell the car, pay off the note, and then start again. It is up to you. I don't suggest taking on a car loan with no down payment though (you'll be upside down from day one), so my suggestion is to stay put in your car. You still have a lot of life left in that vehicle.