Author Topic: Advice for a Co-Worker Please  (Read 4528 times)

JAYSLOL

  • Handlebar Stache
  • *****
  • Posts: 2139
Advice for a Co-Worker Please
« on: June 26, 2015, 08:09:13 PM »
I have a new CW that is in pretty bad financial shape.  He has basically no assets, only just started working again after a year of unemployment and is underwater on a dealer financed 2012 F150, the last 4 payments of which he has missed ($225 bi-weekly i think).  He also doesn't drive the truck because of a DUI and lack of funds to insure/fuel it.  He owes at least $20,000 on it still, and likely can't get that much for the truck if he sold it.  Anyway, he isn't going to make a lot at this job and I'm trying to give him some advice.  What should he do about the F150?  He can't sell it for what he owes, and doesn't want to keep paying almost $500 a month for years for a truck that he can't use. 

Does anyone know if he lets them repo it if he will still owe the difference in value?  (We are in Canada if that makes a difference).   

So what is his best option? 

Elderwood17

  • Pencil Stache
  • ****
  • Posts: 523
  • Location: Western North Carolina
Re: Advice for a Co-Worker Please
« Reply #1 on: June 26, 2015, 08:11:41 PM »
Without knowing any details of the situation, usually it is best to sell it yourself.  Of course, if CW has no other assets he will have to arrange to make payments on the portion he is under water on.

JAYSLOL

  • Handlebar Stache
  • *****
  • Posts: 2139
Re: Advice for a Co-Worker Please
« Reply #2 on: June 26, 2015, 08:33:21 PM »
Thanks Elderwood, so would getting a line of credit from the bank to cover the remainder upon selling work best?  And then paying that much smaller amount off as quickly as possible.  Any other options for covering the difference?  If they repo it, does he still owe that amount, probably plus towing, and auction fee etc? 

kendallf

  • Handlebar Stache
  • *****
  • Posts: 1068
  • Age: 57
  • Location: Jacksonville, FL
Re: Advice for a Co-Worker Please
« Reply #3 on: June 26, 2015, 09:00:48 PM »
Thanks Elderwood, so would getting a line of credit from the bank to cover the remainder upon selling work best?  And then paying that much smaller amount off as quickly as possible.  Any other options for covering the difference?  If they repo it, does he still owe that amount, probably plus towing, and auction fee etc?

If he's not making the payments currently, it's unlikely (like pigs flying unlikely) that he can get an unsecured loan to pay off the balance and sell it.  If he takes it to the lender and turns it in, he'll avoid some of the fees.  They will try to collect the balance (at least here in the US).  If he's in debt up to his ears otherwise, it may make sense to let the truck go, and additionally think about declaring bankruptcy. 

I don't know how Canadian laws work in this regard, however; hopefully someone with relevant background will respond.

JAYSLOL

  • Handlebar Stache
  • *****
  • Posts: 2139
Re: Advice for a Co-Worker Please
« Reply #4 on: June 26, 2015, 09:13:13 PM »
Thanks Elderwood, so would getting a line of credit from the bank to cover the remainder upon selling work best?  And then paying that much smaller amount off as quickly as possible.  Any other options for covering the difference?  If they repo it, does he still owe that amount, probably plus towing, and auction fee etc?

If he's not making the payments currently, it's unlikely (like pigs flying unlikely) that he can get an unsecured loan to pay off the balance and sell it.  If he takes it to the lender and turns it in, he'll avoid some of the fees.  They will try to collect the balance (at least here in the US).  If he's in debt up to his ears otherwise, it may make sense to let the truck go, and additionally think about declaring bankruptcy. 

I don't know how Canadian laws work in this regard, however; hopefully someone with relevant background will respond.

Thanks Kendallf, I believe he did say something about a credit card being maxed, but I don't have the details on how much that is.  I agree it seems unlikely that he could get a loan to cover his losses on the truck, which would likely be at least $6 or $7k.  I'm reaching out for some advice because I have a hard time truly understanding his situation.  Even before MMM came into my life less than a year ago I avoided traditional consumer debt like the plague and my only experience with debt has been a $3500 limit credit card, which i have ALWAYS paid off in full each month. 
I appreciate all the help and input

AH013

  • Bristles
  • ***
  • Posts: 272
Re: Advice for a Co-Worker Please
« Reply #5 on: June 27, 2015, 10:05:26 AM »
Probably would have been best to put this in Ask a Mustachian to get more advice, but as others have noted he'd be best off selling it if he can.

Typically the sliding scale of disposal from most costly to least costly is:
  • Let vehicle be repossessed -- they tack on repo charges, storage fees, transit fees, admin fees and typically sell the vehicle at auction for a deep discount
  • Return vehicle to dealership where purchased -- administrative fees and dealership charges
  • Sell vehicle to a dealer or private party with lender agreeing to waive the lien (whether they write off the balance or roll it into an unsecured loan)

The more legwork you do, the higher likelihood they will forgive the balance after disposal of the vehicle.  But honestly they're 100% in their right to come after him for the difference plus interest.  His best bet would have been to get rid of it before he started missing payments.  Best bet now is to dispose of the asset ASAP...it isn't doing him any good in its current state and is actually costing him taxes/insurance and adding to the outstanding balance by way of late fees & interest.

OneDollarAtATime

  • 5 O'Clock Shadow
  • *
  • Posts: 85
Re: Advice for a Co-Worker Please
« Reply #6 on: July 02, 2015, 03:09:26 PM »
Not sure how realistic this is, but maybe it'll make the 'lightbulb' go off for someone else's ideas:

Can he sell the truck, put all proceeds against the existing loan and then 'peer-lend' the rest?  If nothing else, I suspect it would reduce his $500 down to something reasonable ($100 due to a lower loan balance?) and help with cash flow. 

I've never done crowd-funding / peer lending so I don't know how it works, but I'd think it would essentially be re-financing a loan at a lower monthly rate.  Maybe CW can pay down a peer-lending loan more quickly than just minimum payments, too?

lbmustache

  • Pencil Stache
  • ****
  • Posts: 926
Re: Advice for a Co-Worker Please
« Reply #7 on: July 02, 2015, 05:20:34 PM »
Damn, I wish he was here in California, or even Texas. Used trucks hold their value really well here. You have 2008-2010 F-150s going for $22k! Your friend could make back his money and a little extra. :\

The Fake Cheap

  • Bristles
  • ***
  • Posts: 343
  • Location: Canada
Re: Advice for a Co-Worker Please
« Reply #8 on: July 02, 2015, 06:25:16 PM »
Hi Jayslol.  I'm in Canada as well.

Your friend will definitely still owe the difference on the truck loan if he were to sell it.  I was shocked at the amount of people who didn't realize this is how it works.  People would come to see me at the bank I worked for to pay off their car loan because they sold the car; however of course they sold the car for less than what they owed on the loan, leaving a balance owing to the bank.   

Them:  "What do you mean?  I'm done with the car, I sold it!  Why do I still owe you money???

Me: "Because you took out a loan for 15K, and paid us back 12,500 counting your payments and what you got for the car from the sale.  Yo still owe us $2,500."

Them:  "That isn't right!  I want to speak with your manager!"

These were often people in their 40's.  Imagine you could go and finance a new Beamer, sell it six months later for whatever amount, and the loan just disappears.  That would be nice, wouldn't it? 

Also I don't want to sound judgmental or harsh, but I'm quite certain your friend would not qualify for a line of credit (you normally need assets to get a LOC), or even a personal loan, at least from a bank.   He has one bad credit sign from his missed truck payments, and that is likely not the only bad sign on his credit. 

I would say the best option is to private sell the truck, and put that towards the truck loan, then suck up the balance with lower monthly payments.