Author Topic: Fixing negative equity - smart strategy?  (Read 4051 times)

Specialized

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Fixing negative equity - smart strategy?
« on: August 26, 2014, 02:47:32 PM »
So I'm $7000 upside-down on my car and am ready to just get rid of this thing and learn from my mistake. I dont have much cash savings to pay it off, but I do have a $16,000 credit line I can tap at any time. I was thinking about just using my CL to pay off the negative equity on this car so I can sell it for what it's worth. I'll of course need to buy another car so I'll get something used in about the $5000 range. Ultimately this means I will have no car payment, however I will have $12,000 in new credit debt at 12% interest. My car interest rate is 3%. The car will be paid off in 6 years. If I apply the same car payment I have right now to my CL then my CL will be paid off in 2 years . Of course I could pay it off even faster if I wanted depending on my budget.
 
So the question is, does this seem like a smart move? I know it sucks to trade a 3% loan for a 12% loan, but if it gets me out of debt in 2 years instead of 6 then that has to be a good thing right? Instead of losing $35,000 I will have only lost $12,000.  Am I missing anything?

okashira

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Re: Fixing negative equity - smart strategy?
« Reply #1 on: August 26, 2014, 02:49:42 PM »
Combine that with an application for a chase slate CC or alliant CU CC and transfer the balance to 0%.

Specialized

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Re: Fixing negative equity - smart strategy?
« Reply #2 on: August 26, 2014, 03:51:36 PM »
How would I transfer an installment loan to a credit card?

arebelspy

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Re: Fixing negative equity - smart strategy?
« Reply #3 on: August 26, 2014, 03:53:10 PM »
How would I transfer an installment loan to a credit card?

Most CC balance transfer offers give you checks to write - you'd just write a check to the installment loan to pay it off, and it would show up as a balance transfer to your CC.
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mrdebtbeard

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Re: Fixing negative equity - smart strategy?
« Reply #4 on: August 26, 2014, 05:03:52 PM »
Worst case if the balance transfer can only be used on debt use the credit line to pay off the negative equity and then the balance transfer to pay off the line. Or if you need/want to get really fancy do the full balance transfer to a cc that is paid in full. You'll end up with a 10k negative balance. Wait about 5-7 days for everything to post and then call the card with the huge negative balance explain that you goofed and ask them to cut you a refund check for the negative balance. I've personally done this with a 12k balance transfer.

But watch out just because the balance transfer says its a 0% interest rate a lot of them charge 3% as a one time fee... if you have to pay 3% every 6 months to juggle cards you still end up paying 6% a year.

okashira

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Re: Fixing negative equity - smart strategy?
« Reply #5 on: August 26, 2014, 05:38:50 PM »
How would I transfer an installment loan to a credit card?

Your post implied that you had this part figured out.

1.) when you sign up for the (slate/alliant) CC, you can just enter your auto loan # and boom they should be able to transfer it. Doesn't need to be another CC, just a debt.

2.) You can get a cash advance from a certain Penfed CC with 0% fee. Then, you can (immediately) transfer the balance to the slate or alliant card.
Otherwise, use the checks as suggested, but these usually come with 2-4% fee.

bdoubleu

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Re: Fixing negative equity - smart strategy?
« Reply #6 on: October 05, 2014, 01:09:39 AM »
Worst case if the balance transfer can only be used on debt use the credit line to pay off the negative equity and then the balance transfer to pay off the line. Or if you need/want to get really fancy do the full balance transfer to a cc that is paid in full. You'll end up with a 10k negative balance. Wait about 5-7 days for everything to post and then call the card with the huge negative balance explain that you goofed and ask them to cut you a refund check for the negative balance. I've personally done this with a 12k balance transfer.

I just did this with the Chase Slate (0% until 11/15, no fee).  I called them, and they would not give me balance transfer checks or directly deposit the balance transfer amount into a checking or savings account (like I have gotten with Citi in the past).  It had to be to/from another credit card.  I wanted to use it to pay off my car loan, which is obviously not on a credit card.

So I transferred the amount (just under $10,000) to a Citi card I have, and requested a "refund of overpayment" via the Citi website.  Whole process from the initial balance transfer request to money in my bank was 2-3 weeks.  No questions asked.  I feel it was worth the extra "hassle," especially since most cards have a 3%+ fee for balance transfers.