Coincidentally my old car died a couple years ago just when gas was around $3.50/gallon and you had to be on a waiting list for new hybrids — and they were charging top dollar for used ones — I bought an ‘06 honda civic hybrid. Now gas is cheaper and so is the value of my car (about $4,000 less than current loan value). Loan rate is 8.5% and i’d like to refinance if possible. But i’m upside down and bank will only finance up to value of car. I get this… but seems odd cause with interest my original loan was more than value of car to begin with. They are calculating interest into loan value. Wouldn’t any loan would be more than car value if interest is included? Maybe i just don’t understand how it works. Any thoughts/options?
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First, you should not finance depreciating assets. You found that out now that you see you owe more than the car is worth. In the future, save up and pay cash for cars. And be smart about it and buy a one or two year old used car that has depreciated.
In any case, if you bought this a couple of years ago, you should have 2 years left at the most. Quit worrying about the interest and buckle down and pay it off. Get a part-time job or cut out some expenses and get out from under that debt. You are going to waste all kinds of time and effort trying to reduce your interest rate by 1% on what – a $10,000 debt? Quit worrying about the pennies and start worrying about the dollars! Pay it off.
Talk to your local Credit Union if you have decent credit they are the ones that will work with you. There is a insurance for a loan that is upside to cover the difference if something happens to the vehicle. Interest should not be factored in to the value of the car at anytime you can get a payoff on the loan and not have to pay anymore interest.
Why do you want to refinance? You can’t unless you bring the cash difference to the table.
It makes no sense to refinance unless you can get BOTH a significantly lower interest rate AND a new loan term equal to or shorter than the time remaining on your existing loan term. Otherwise, you could wind up paying more in total interest (even with a lower interest rate) than you would have by just keeping the old loan.
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Financed cars is more expensive to insurance cause it requires full coverage. You can compare how much you would pay for full coverage of this car using this tool – carinsurance.deep-ice.com