The Big Mistake

[Erin]

So I assume most people have made a big financial mistake once or twice (Heck even MMM did a full post on his - although his wasn't this dumb), so here is mine:

5 years ago this April, I cosigned on the loan for a quad. I was in the throws of a new/drunk/dumb/you're an idiot love, and agreed to cosign on manfriend's daughter's boyfriend's loan* (are you confused yet?). Lets call this boyfriend "Doug". While the loan would have been paid off this April, IF Doug wasn't a complete financial numskull, it currently has a balance of $5,600 with a 24.99% interest rate. The quad is worth about $2k and Doug still retains posession. 

Because Doug hadn't been making the payments on time, in full, or sometimes at all, the interest rate shot up from 12% to 24.99%. My credit score shot down to somewhere in the 600s (and is now back up to 720ish). In August, 2011, I began making the payments myself (and trying to collect the monthly payment from Doug). I pay $275/monthly (the minimum being $180ish?) which should have it paid off in 30 months, and try and collect $125 bi-weekly from Doug. Since it has been paid on time for 6 months now, the oh-so-generous HSBC is willing to give me a 19.99% interest rate now (thanks guys!).

My question: Should I get a lower interest loan at a bank or credit union to payoff the balance owed to HSBC so I at least have a better interest rate than 19.99% and then continue trying to collect from Doug even though I will have no legal ramifications to do so because I alone will be responsible for the new loan? If I do this, I do NOT intend to take posession of the quad for multiple reasons, so assume this is not an option.

I am aware that I will end up taking a loss in this situation, I am simply looking for ways to minimize the financial loss & the emotional damage to myself and my family.

Any thoughts/suggestions are much appreciated :)




*Disclaimer: I know that this is completely fucking stupid, and the worst part is I knew it was completely fucking stupid while I was doing it.

[shdrdr]

If you are not interested in getting the quad, why keep paying for it.  If I was in a similar situation, I would stop the payments. If Doug is not interested in paying, let the quad get repossessed.  Use the saved money to pay off all credit cards and take the credit hit at HSBC. High interest rates on credit cards don't matter if you don't carry a balance.
Your credit score will suffer for a while, but if you keep up with all other payments, it will come up again.

[palvar]

Erin-
  Do you have any assets you could use as collateral?  That would lower your interest rate a good deal.  I believe you can use a 401k as collateral.

[Erin]

palvar - Yes - a paid in full 2008 Toyota Corolla. I also have the cash saved so I could payoff the quad (just enough cash), but I don't want to be cash poor - I didn't think to add these details into the equation.

shdrdr - If I just stopped paying for the quad, I would still owe the deficiency balance to HSBC and they would eventually sue both me & Doug. I wouldn't care if Doug got sued, but I do care if I get sued because I'd still be stuck with the judgment/debt + court fees/attorney costs.

[lazydragon]

Lousy situation; my condolences.  I think if it was me, I'd pay off the balance with your saved cash and chalk it up to a bad deal that taught you something.  Then work on rebuilding things.

This will have the added benefit of giving you peace of mind and letting you get back control of your (financial) life.

It's sad how easy love can mess up one's finances.  I did something similar to this in the past when resolving a divorce.  Instead of paying spousal support for 5 years or something, I got a big loan from a bank, gave her a lump sum (which was less than the 5yrs would have been) and moved on with my life.  The happiness from being free and the desire to correct the mistake allowed me to knuckle down and seriously save over the next couple years to pay it off.

[palvar]

If you can afford it, I would just pay it off with the cash that you have.  If not, pay off as much as you can.  20% interest is robbery.

[vwDavid]

Can you personally reposes the quad (as doug obviously does not deserve it) sell it and pay off the loan?

[patocaster]

I would like to send an e-punch to Dougie in the monkey-uncle-cousin face!

Pay it off IF it won't make you too cash poor for comfort and put little Dougie to work WHILE he pays you back.  Labor for interest.  You're doing him a favor.

[Erin]

Can you personally reposes the quad (as doug obviously does not deserve it) sell it and pay off the loan?

No because the Title lists HSBC's secured interest so I believe I would have to pay them off prior to transferring the Title? Feel free to correct me if I'm wrong here, but I don't believe this is an option?

I think at this point, I'm going to make the big decision of paying it off versus refinancing in the next few months. I just upped my contract workload & my husband's work is seasonal and his big boom starts in a month, so once I feel out our duel income in April, I feel like I'll be equipped to take the plunge of emptying the savings account to pay it off. I do think this is ultimately the best decision. I just hate seeing $ I worked so hard for go out the window.

Thanks for the e-punch :) He does a few things laborwise for us, but I agree that the ante needs to be upped.

[rowsdower]

An alternative to repossessing it would be to apply some pressure on Doug to sell it voluntarily.  If Doug and the daughter are still together she might be able to help with that. 

[chrissyo]

Can you personally reposes the quad (as doug obviously does not deserve it) sell it and pay off the loan?

No because the Title lists HSBC's secured interest so I believe I would have to pay them off prior to transferring the Title? Feel free to correct me if I'm wrong here, but I don't believe this is an option?

If I were you, I'd likely pay it off (either by re-financing with a personal loan or from savings), personally reposes the quad and sell it to recoup some amount of money. At this point I'd be interested in keeping my credit from getting crappier, cutting my ties with this jerk and just getting this whole ordeal out of my life.

[tjh]

That is a high interest rate, and you've had the loan for five years?  That is a major burden on you psychologically, and you'd benefit from removing it from your life immediately.  Is there any way you can get possession of the quad and sell it on craigslist?

I would take the loss and consider it an expensive lesson.  I've made mistakes, and you'd help yourself most by paying off the loan ASAP.

[keepingmobens]

I actually had a similar situation happen, and it was also with a quad, no less. A friend of my fiancee (at the time) agreed to "take over" the payments of her quad. Of course, he stopped paying, and it was still in her name. So, we had to pay off the finance company (it was also HSBC, I believe), and then we actually hired a repo company to reposess it, then we sold it for what we could get for it. Of course, we lost a bunch of money. The repo company actually wasn't that expensive, I think a few hundred dollars, and we were able to sell the quad for $2500 or so on craigslist. But the loan amount was 5 or 6 thousand, before we paid it off. That's what you call "stupid tax." The good thing about these situations is that they are so painful that you don't tend to make the same mistakes twice.

If you're going to pay off the loan, at least get the quad back somehow and get what you can for it. It'll cut your losses in half.

[arebelspy]

Agree on trying to get him to sell it, then split the loss.

Likely he won't agree to that, so you may just be stuck. 

I wouldn't go into further debt (leveraging paid off car, or whatever) on this.  Pay it down, pay it off, whatever you have to, and move on.

Sorry this happened to you.

And hey, this is a few thousand dollar loss.  My Big Mistake was in the 100K range (and was realllllyyy dumb), so don't feel too bad.  ;)

[AlexK]

Do you like bandages to pulled off slowly or quickly?  I prefer quickly so I can forget about it and move on.  So I would pay it off and ask for the quad (doesn't mean you'll get it but it can't hurt to ask).  If this person is going to be part of your family in the future, forgive him.  It was your stupid mistake, not his.

Nobody leads a perfect life.  $5k isn't going to make or break you.  The lesson could be worth many times that in the future.

[Brett]

My condolences Erin, but we all do dumb stuff sometimes, don't worry. I'm going to agree with most of the above replies, the interest on the loan is going to outweigh the interest on your savings. Pay it off if you can, get yourself free. You don't need the stress every month. If you can get Doug to sell the thing, or take possession of it some other way, then that would obviously be awesome. If not, then it's a costly lesson, but you'll be wiser for it and maybe you can use your experience to help others avoid similar situations.

I wish you all the best in sorting this out and hopefully reclaiming your money from this idiot.

[SpendyMcSpend]

I agree with Alex.  Also, you have already taken the loss!  With interest, if you don't pay it off now, you will lose thousands more.  Pay it off, move on, ask for the quad, and then forgive the debt.

[Louisville]

What's a quad?

[sleepyguy]

Pay off in full and take the loss... I assume you broke it off?  That will be a lifetime of financial lessons in the making.

[kdms]

What's a quad?

They're talking about an all terrain vehicle, otherwise known as an ATV or sometimes a quad :)

[CU Tiger]

I would like to know what the OP finally did. Erin? Care to share?

[chasesfish]

Why won't you take possession of the quad?