20% APR On A Car Loan At 20 Years Old — How Do You Fix A Financial Slip Like This?
A car is one of the biggest expenses most people will ever have, excluding housing. Cars are already expensive, but if you get bad financing, it can become even more costly. A 20-year-old is currently in that spot after taking out a 20% APR loan to buy a car.
The 20-year-old tried other financing options before resorting to 20% APR, but couldn’t get approved for anything else, despite a 668 credit score. Income may be the bigger concern, as the 20-year-old’s earnings aren’t disclosed.
The 20-year-old admitted on Reddit that it was a mistake to buy a car at 20% APR, but they are now looking for suggestions on how to bounce back. Hundreds of Redditors shared their thoughts in the comments.
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Return The Car
Multiple Redditors suggested returning the car and getting out of the loan. The original poster bought a 2014 Ford Fusion, and one Redditor offered a cautionary tale of a car that turned out to be a lemon.
“I worked with a guy (who was older than you and should have known better) who made the same mistake with a different car in a similar class and age,” the commenter said. “Similar price and same criminal interest rate. The car had a major engine failure within the first year and would have required major repairs, which he could not afford and were not justified based on the car’s basic value.”
The commenter said that his friend parked the car for five years since it was unsellable and took the bus to work during those years. The car was scrapped shortly after paying off the loan. Selling the car can get the 20-year-old out of a 20% APR loan and offer a fresh start.
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Refinance With A Bank Or Credit Union
Multiple Redditors suggested refinancing the loan with a bank or credit union to secure a lower rate. While you may not get the best rate imaginable, it’s hard to imagine a rate that’s worse than 20% APR.
“Go to your local credit union and see if you can refinance with them,” one commenter said.
“At the credit union, tell them you are looking to refinance the auto loan. You aren’t looking for a personal or unsecured loan,” another commenter said.
The only problem with this route is that some banks and credit unions won’t take on an auto loan for an old vehicle, like a 2014 Ford Fusion. The car may be too old to get financing from some banks, and you may have to settle for a rate that’s still high but not as high as 20% APR.
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Look For Other Transportation Options
Returning the car was a major theme throughout the comments, but one commenter got more specific about transportation options. Just because you can get a car doesn’t mean you can afford it, and there are plenty of other options.
“You rely on friends and family to give you a ride,” the commenter said. “When they can’t, you walk or ride a bike. When that isn’t possible, you take the bus. When that isn’t possible, you pay for an Uber since that’s cheaper than financing that car and paying for insurance.”
Some commenters also suggested getting an e-bike, while others cautioned that it may not be feasible if the 20-year-old lives in an area that gets long winters. There are plenty of ways to commute that do not involve buying a car. Having your own vehicle is a luxury that you must be able to afford. Rushing into it can set you back financially for several years. While a 20% APR is a bad deal, the best way to handle it is by selling the car.
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