New car dealers are always trying to get their cars off the lot, and on the road. As the economy picks up, you’ll be offered all sorts of loans to get the “car of your dreams”. So many of my clients are forced into bankruptcy by a bad decision on a car loan. Its best to think before you buy, and compare the financing terms. Don’t just look at the monthly payment. Your loan could be extended to 6 or 7 years, a bad idea, because you’ll pay more interest over the longer time period. I wrote about this in my blog post “Six Plus Car Loans- a Big Help or a Big Mistake?”
And, don’t fall for the trick where salespeople just have you drive the car out, without finalizing the financing. Never agree to buy a car without knowing all of the financing terms!
This article from the Chicago Tribune shows one of the tricks that can land you in trouble. It’s almost never a good idea to trade in a car where you owe money on it. Worse is if you owe more money on the trade- in than it is worth. That’s called “negative equity”. Then, you have to borrow more money just to continue to pay for the old car, while still paying for the new car! You’ll be stuck with the loan well after the car starts breaking down!
Getting a high-priced, high interest rate loan for a car will give you a very high payment. Many times, the high car payments, for such a long time, can drive people into bankruptcy. It’s hard enough to make the payments for 5 years, but when you add another year or 2 to the payments, you are paying for a car that has depreciated way below what is owed on the loan. If you do find yourself stuck with a bad car loan, and can’t afford the payments, you might need to file for bankruptcy.
If you have questions about car loans, are stuck with a bad car loan, or facing repossession, we can help you. We can talk about your options, what to do with the bad car loan, and how to get rid of a car and eliminate its loan if you need to.
Daniel J. Winter
BankruptcyLawChicago.com
djw@DWinterLaw.com
Offices in Chicago, Gurnee, Oak Lawn, and Skokie, Illinois, and Milwaukee, Wisconsin.
