Debt Consolidation

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networkn

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#1943445 19-Jan-2018 11:54

tdgeek:

Ok. Im thinking repayments . I assume a 10k 5 year loan is about $275 a month. A private sale should get an ok price and avoid 275 a month for another 4 years, replace that with a cheap runabout till he's on his feet, CAP may want that

How will it help? Paid 10K a year ago, with interest at 14% it's likely he has paid around $1000-1500 off the principal or maybe even less, the car needs about $1500 worth of repairs, so the car "owes" him around 10K probably, then he sells it, likely to get 7-8 for it if he's lucky, meaning he still owes the finance company 2K, plus he still "needs" a car, so he either fronts up with a few thousand in cash, which he obviously doesn't have, or he gets a 2-3K car on finance, which as we have determined, he would be super unlikely to get.

Also, his contract for the car doesn't allow him to repay early without significant penalty (pretty much all the interest that would have been accrued).

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#1943450 19-Jan-2018 12:00

wellygary:

networkn:

As I said, it won't help to sell the car as it will be worth less a year into a 5 year loan for 10K, than the loan would be worth.

Yeah, but the car is only going to decrease in value, and unless he is able to keep up the payments the loan could increase.

CAP will likely take stock of all his assets and if there is a couple of K that can be realised between the value of the car and a cheap runabout, then they may require him to sell it as part of the process

There is no way his is going to be able to section off the car and car loan when they go through everything...

Thats what I feel. Even if a private car sale did not realise any cash after the loan is paid down, there is an estimated $275 a month to put towards the other 10k of debt. Then the lower loan at $200 a week is paid down, that's more cash to accelerate the others. Done right, its gets better and better, and quicker and quicker. Its just a numbers game. But, as the OP has mentioned he wont let the car go, so it becomes much harder to clear the others, and that may well cause CAP to decline to help.

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#1943546 19-Jan-2018 14:17

networkn:

How will it help? Paid 10K a year ago, with interest at 14% it's likely he has paid around $1000-1500 off the principal or maybe even less, the car needs about $1500 worth of repairs, so the car "owes" him around 10K probably, then he sells it, likely to get 7-8 for it if he's lucky, meaning he still owes the finance company 2K, plus he still "needs" a car, so he either fronts up with a few thousand in cash, which he obviously doesn't have, or he gets a 2-3K car on finance, which as we have determined, he would be super unlikely to get.

Also, his contract for the car doesn't allow him to repay early without significant penalty (pretty much all the interest that would have been accrued).

Say he sells the car for 5.5K (7K less $1500 in repairs), he buys a 2-3K car to get around in and has 2-3K to help get rid of the overdue outstanding loans that he currently cannot service,

This should get him out of the hole he is in, and allow him to gradually repay the rest of what he owes,

Sure he will still have a 10K car loan outstanding, and it may feel horrible to pay off a loan on a car he doesn't have, but he will be in a better net position than he currently is..- turning his 7K car into a 2-3K car and monetising the rest.

I think something like this is likely to be what CAP would propose,

But if he will not part with the car in the short term , then he may end up loosing it the medium term if the loan companies that he has debts with come looking for assets.....

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#1943554 19-Jan-2018 14:27

wellygary:

networkn:

How will it help? Paid 10K a year ago, with interest at 14% it's likely he has paid around $1000-1500 off the principal or maybe even less, the car needs about $1500 worth of repairs, so the car "owes" him around 10K probably, then he sells it, likely to get 7-8 for it if he's lucky, meaning he still owes the finance company 2K, plus he still "needs" a car, so he either fronts up with a few thousand in cash, which he obviously doesn't have, or he gets a 2-3K car on finance, which as we have determined, he would be super unlikely to get.

Also, his contract for the car doesn't allow him to repay early without significant penalty (pretty much all the interest that would have been accrued).

Say he sells the car for 5.5K (7K less $1500 in repairs), he buys a 2-3K car to get around in and has 2-3K to help get rid of the overdue outstanding loans that he currently cannot service,

This should get him out of the hole he is in, and allow him to gradually repay the rest of what he owes,

Sure he will still have a 10K car loan outstanding, and it may feel horrible to pay off a loan on a car he doesn't have, but he will be in a better net position than he currently is..- turning his 7K car into a 2-3K car and monetising the rest.

I think something like this is likely to be what CAP would propose,

But if he will not part with the car in the short term , then he may end up loosing it the medium term if the loan companies that he has debts with come looking for assets.....

Good plan but you cant sell a car you do not own. Apart from T+C's, Hire Purchase means the item is owned by the hirer (loan company) until the last payment is made. If its not HP, but a loan, the car will be collateral I assume, so you cant do that either.

But good creative accounting!

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#1943582 19-Jan-2018 15:07

tdgeek:

Good plan but you cant sell a car you do not own. Apart from T+C's, Hire Purchase means the item is owned by the hirer (loan company) until the last payment is made. If its not HP, but a loan, the car will be collateral I assume, so you cant do that either.

But good creative accounting!

You can sell a car with money owing, granted it usually puts off buyers, but it is not illegal to do so

its a civil issue

http://www.motorweb.co.nz/pub/blogpost/25/help-ive-bought-a-car-with-money-owing

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#1943592 19-Jan-2018 15:22

wellygary:

tdgeek:

Good plan but you cant sell a car you do not own. Apart from T+C's, Hire Purchase means the item is owned by the hirer (loan company) until the last payment is made. If its not HP, but a loan, the car will be collateral I assume, so you cant do that either.

But good creative accounting!

You can sell a car with money owing, granted it usually puts off buyers, but it is not illegal to do so

its a civil issue

http://www.motorweb.co.nz/pub/blogpost/25/help-ive-bought-a-car-with-money-owing

Yes you can, but you tell the finance company, and they make arrangements to get their loan paid back from the proceeds

Yes, not illegal, true.

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