Cars. Automobiles. Junkers. Bling. Gas Guzzlers. Tinker Toys.

First thing that comes to mind: “Chaching!”. Car maintenance, cost of the car, cost you pay the dealer. But, I live in California, commute 80 miles a day to work, and have children equates to “I need a car to drive the insane freeways, get to work in 20mph traffic, and will have wheels just incase something happens with the kids”.

Well, here is my issue. I bought a $14,000 car at 15.9% interest. When I finished paying it off, I will have paid $28,000 for the car. Dreadful, right? I know.

(Now I remember why I didn’t refinance! Light bulb moment! My car is upside down. I didn’t have the cash to pay the ‘extra’ on the car. So, I would need to refinance the car’s worth and take out a loan for the ‘extra’. Which would equate to the same, if not more, of an annual percentage rate. Hence the fact I didn’t refinance my car. Glad I figured that out!)

At this time, I owe $11,500 for the car and it is only worth $6,800. I am at a steady rate of owing $5,000 more than the car is worth.

Every once in a while, I began to ponder on my options of getting out of this upside-down car loan. So, this time I decided to search my options and this is what I found:

• If you have a lot of car debt and you want to relieve yourself of a butt load of debt very quickly, then get rid of the flashy car(s). If tooling around in a sweet ride is more important than being financially healthy, then you need to seriously re-evaluate your priorities. Some people might not sell their car, because they do owe more than it is worth. However, if you owe $18,500 and you can sell the car for $16,000, go ahead and do it! If you don’t have the cash to cover the $2,500, then go to a local credit union and apply for an unsecured loan to cover the difference. You can get a loan for this range fairly easily. You’ll still have debt, but I’d rather have $2,500 in debt rather than $18,500. *I really don’t want to take out another loan. I will have to ponder this one. It’s pay $22K left remaining or pay $5K. The other problem is that I need money for another car. So, that is requesting another $5-$6K on top of the $5K loan. So, it would be pay $22K or $11K?
• The best advice for someone who is upside down on an auto loan? Hang on to the car and keep on making payments. Keep the car they have, that’s probably their best financial bet. You’ll want to stick out the old loan until it’s paid for or, at the very least, until the amount you owe is roughly equal to the car’s market value. *The amount will never become roughly equal to the car’s market value. At least that I can see. Since, I’ve had the car it has always remained $5K above.
• You may want to investigate refinancing your auto loan with a home equity loan, which will likely carry a lower interest rate. *Forget the home equity loan. No more loans! And I don’t need anymore New Debt!
• If you refinance at a lower interest rate and keep your monthly payments the same, you will pay down the loan principal faster. If you can afford it, speed things up even more by shortening the term of the loan and increasing your monthly payments. *Speed things up… this is a possibility to consider. But, I am not sure I can since I am on a ‘schedule’. However, I could always move this up on the Snowball schedule to pay sooner than later.

After looking at my options on paper, this is what I figure: First, I don’t know that anyone would consider giving me ‘another’ loan for $11, 000. Nor do I really want to incur any new debt. I do not think at this time, I will be able to pay-off the extra $5, 000 at the same time buying a used car at approx $5,500 (come up with $10K on my own accord while Snowballing debt?!?!).

It seems my options stands at:

Well, as you can see: Cars can be a nuisance, if you let it. Someone with a Smart Money Mind (according to statistics) would have bought a used car (roughly 2 years old) and paid with Cash.

So, let this be a hard lesson learned on my behalf. As, this one is my biggest financial blunders. But, now we all are grazing better pastures, right? We will heartily learn from our past mistakes, become debt free, and become Smart Money Minded people rich beyond belief!

So, what’s is your biggest financial blunder? Or what was your biggest financial blunder? Come on… I know we all have them. :)~

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