Poor Credit Refinance to Avoid Repossession

by Denise
(Morris County, NJ)

Question: We need poor credit refinance to avoid repossession.

We only owe $6500 on our 2006 Subaru and we came into hard times with unemployment and medical bills.

We need our car, but can't pay the $407 per month. On my husband's unemployment check and my small home business we can do $200 a month, but our car loan company would not refinance and kept promising to put us in a Hardship payment mode that never happened.

Now we are in repossession and are trying to sell the car. It's worth about $10,000 but we cannot even get a buyer for $7000 right now. With our unemployment and poor credit, what would you recommend we do to try to maintain our car?

We went to the dealer, Carmax, Craigslist, ebay...no luck...we'd like to just refi the balance of the loan to a lower monthly payment but don't know where to go in our situation. Please help.

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Answer: Hi Denise,

I have some advice for you, but unfortunately it may not be what you want to hear.

Poor credit refinance is difficult and it sounds to me like one way or the other you are going to lose your Subaru.

Unfortunately, you will - with almost 100% certainty - not find a lender that will refinance your loan with poor credit under the circumstances.

The fact that you are currently behind on payments is a deal breaker for most lenders. The easiest way to resolve this would have been if the lender would have worked with you, but that looks like it is not the case.

What I would suggest is to try and sell the vehicle and get what you can out of it. Depending on the model, how many miles and its current condition, you may have some equity in the vehicle.

This way you avoid the repossession and walk away with some cash to put towards a new purchase. It's easier to buy a car with poor credit than it is to refinance with poor credit and the extra cash will help with down payment.

Even if you to were break even selling the car, you'd avoid the repossession. This may not seem like a big deal (credit wise) now, but down the road you'll be glad it didn't get repo'd.

Let's say you can't sell the vehicle...

Maybe you can see if a family member or friend would be willing to drive the car and make the payments.

Once you get back on your feet you can get the car back from them and reimburse them some for the payments they've made.

Or, just have them take over payments and once it's paid off they get title.

Be sure to look into the legal aspects and insurance aspects of someone taking over payments however. This may violate some clause in your contract where the bank can still demand the vehicle be turned in.

To sum this up...

Poor credit refinance is difficult to do (if not impossible), especially in this economy.

Even if a lender was willing to give you a loan under these circumstances (I don't know of any though) the terms of the loan probably wouldn't make your situation any better.

If you can avoid a repossession that is best. It's even better if you can avoid it and walk away with some cash!

Hope this helps,
Justin