Need some financial advice?

I am currently paying on a car that I have had for two yeas. Now that I have a family expenses are getting tight and I realize that I can't keep my lovely car. I am currently one month behind with the second payment coming up on the 15th making last months 30 days already :( I don't really have great credit it's fair shall I say. Do I sell it but if I sell and pay it off with what I owe and can't finance again even for a cheaper car because of my history with this car. Or do I repo it . See I am very confused but trying so hard to make the right decision for our family. Our goal is to try to buy a house the car financially is what is holding us back. You know the whole debt ratio thing.Someone who knows about this please give me some sound advice

You would be best off selling the car because a repo will damage your credit score. Also, if your debt ratio is that high you should probably look into paying off some/most/all of the debt before you get into making a house payment. House payments can fluctuate even with a fixed rate mortgage. Insurance changes as does property taxes. If you buy at the max you can afford, if one thing increases you might be looking at a foreclosure instead of a repo.

Repo is a very bad idea. What ever you do, don't let that be your choice. It kinda all depends on how "wet" you are in this car (do you owe way more then it's worth). If the answer is no, I would suggest trading it in on a good used car and extend the term out as far as the bank will possibly let you go. The longer the term, the lower the payments per month. However, selling it on your own may bring in more money then you'd get offered as a trade in value then you pay off the loan (provided you got enough from the sell) and take the rest as a down payment on a more affordable car. Good luck

selling the car and only having some late pays is no be deal
having a repo on your report is going to burn you for a long time paying through the nose in high interest rates
if you can sell the car for payoff do it right away sooner the better

A repossession on your credit report will have more of a negative effect than a late payment, and could prevent you from getting financing for a mortgage in the future. So, my advise would be to try to sell the car privately (trading in to a dealership will never give you what it is really worth). In order to sell the car though you will have to be able to pay it off completely for the bank to release the title. Assuming you are able to sell the car for as much or more than what you owe, there is no doubt that someone will be willing to finance you even with some bumps on your credit. You will likely pay a higher interest rate, but you still will be able to get a car. Make sure you take all things into account with the new car (price, payment, gas mileage, insurance cost, etc.). Go conservative, the least expensive you can go without sacrificing saftey or reliability. Used cars need more repairs too so take that into consideration. Lastly, when it comes time to go home shoping, make sure ALL of your current debts are current (nothing past due at time of application). This will assure you get the best mortgage rate. Even a small difference in rate over the course of 30 years can mean you pay thousands more in interest. Best of luck to you.

Hi ginger,

I know this is a tough position for you, I'm sorry.

I have seen MANY people in the same position you are in right now.

However, I'm a little confused. If someone has told you that you do not "Ratio out", because of the car it makes me wonder who you have talked with.

The back end debt ratio can be as high as 55%, and you could be okay depending on the loan program although, my Loan Originators do not recommend over 40% for their clients.

As far as how it will affect your future home buying situation, lates are not so good, but if you have to be late, be late in consecutive months, "rolling lates are a little better than sporadic lates" and make sure you get yourself caught up. a Repo is definitely bad.

The bottom line is if you are "upside down" in the vehicle, "owe more than it's worth", keep the car and wait to buy your home for a little while, because I assume you need a car for work, etc. and if you try to sell to just to drop your ratios, it tells me that you are going to find it hard to keep up with all of the other things that come along with home ownership. Not just PITI, or Principal-Interest-Taxes and Insurance, like repairs and misc. cost that add up.

Good Luck,
~Trey