Subprime Car Loans
Many bankruptcy filers will tell you that car loans are getting harder to handle. This year the average monthly loan payment for a new car has already risen fifteen dollars from last year. The average loan is also at a record high at nearly $32,000. An increasingly common element in bankruptcy filings these days seems to be bad car loans.
Roughly 24 million consumers hold subprime auto loans, which are based on a credit score below 620. Over all a little over 20% of all vehicle loans are subprime. The economy is currently shouldering close to 450 billion of these loans. Subprime loans are not offered by traditional car lenders or credit unions, but by auto finance companies or car dealers.
Naturally the interest rates on these loans are horrible( and the delinquency rate is close to ten percent.
Chapter 13 Bankruptcy & Subprime Loans
If you are attempting to cope with one of these loans, chances are Chapter 13 bankruptcy might be a great answer for you. Subprime car loans ranging from 15 to 30 percent normally result in you making little or no progress towards paying off the principal. In Chapter 13 that rate is normally reduced to 5 percent.
If you don’t think reducing a car loan from 20 percent or higher to 5 percent isn’t going to save you a ton of money over the course of your loan, play with the two numbers in a debt calculator. The results, thousands of dollars in savings, will likely surprise you.
In addition to reducing the interest rate on your subprime loan, Chapter 13 lets you eliminate all your other debt often with no repayment at all. If your car loan is over two and a half years old or you have refinanced the car since you bought it, we may be able to even reduce the principal of the loan to the value of the vehicle. So if you owe 10,000 on the car but it’s only worth 5,000, you only pay back 5,000 and at a reduced interest rate.
If you are in a subprime loan, there is no reason to accept it. Chapter 13 will enable you to turn it into a good loan. If you have any questions about how we can improve your car loan and get rid of all your other debt, please contact our offices at 602-598-5075 or 602-786-9175.