Need Advice - Reducing debts (funds, pay, rate, vehicle)
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Situation A: I owe $30,000 at 1.9% interest on a new pickup, and the appraised value is 26,500. I have a credit card balance of $4400 at 10.9%. I have a motorcycle balance of $4500 at 4.99%. I have $5500 in available cash. I will also have a tax refund of $4100 arriving after IRS processes education credits claimed (I am not counting on the refund being disbursed until May).
GOAL: To sell excess vehicles and pay off credit card
WHICH ACTION IS BETTER? I am hearing mixed reviews from friends and co-workers.
Action 1: By paying all $5500 towards the truck, I can sell my truck to Carmax saving $500 a month and $900 a year on insurance (I have a paid for fuel efficient daily driver). I can use that freed up income to set automatic monthly payments towards the credit card balance. When my tax refund arrives, I can wipe out the credit card debt. Once the credit card is paid in full, I can set up automatic payments to my motorcycle to pay it off and sell it to a local bike dealer in my city who has made an offer on it of $5000 (The same bike is on their floor for $7500...I know what you're thinking).
OR
Action 2: By wiping out the credit card debt now, I will not have money to cover the difference of money owed versus money offered by Carmax. I will continue to make truck payments. When my tax refund arrives, I can slap the entire $4100 return towards the truck and obtain a new appraisal. My offer may have stayed the same or lowered by this time. If the offer is low, I would then keep the truck, pay off the motorcycle, then sell the motorcycle (saving $160 a month and $300 a year on insurance). Meanwhile, continue to pay towards the truck until it hits a plateau before selling it.
I'm curious what others will say. Personally, I would pay off the credit card debt because it has the highest interest rate. In the meantime you can still enjoy your vehicles (or not... if you are worried about preserving the appreciation value). If you have an income (assuming you do), then try to see about saving towards paying either off until your tax refund comes in, if not, sit tight and wait until May. It's not that far from now.
Pay off cc. Discontinue pickup, and change insurance to "storage", which is $10 or so a month. DO NOT DRIVE IT.
If and when refund arrives, pay off motorcycle and rid of it. Health costs are way to big to chance riding a bike. Money obtained from sale, dump into your truck lump payment. Rid of truck.
Do not repeat those mistakes again. It does not matter what you do now, if you get yourself into another bondage later.
Location: 23.7 million to 162 million miles North of Venus
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How much did Carmax offer you for the truck?
If it were me and I am planning on selling both vehicles and paying off the credit card ..
I'd get written offers for both vehicles then talk to both lenders to find out what their requirements are for selling a vehicle that has a loan on it. You might be able to sell the motorcycle without having to pay it off first, saving you the 4.99% a month + insurance payments. Pay off enough on the truck where the balance is at or under what the written offer from Carmax is, saving some of the money for any further amounts due on either vehicle. Once both vehicles are sold and the loans are fully paid and closed then take any left over money and throw it at the credit card paying down the balance, and then fully paying off the credit card when you get your tax refund.
If both vehicle lenders are willing to work with you, and I don't see why they wouldn't, then you probably could have both vehicles sold and all three debts paid off within the next couple of months.
There's an automotive forum on here I believe, where you might ask about selling a vehicle that has a loan on it.
You might also read over the following link to get some ideas .. Sell a Car with a Loan - How to Get Rid of Financed Autos
I would say pay off the credit card, then pay off the motorcycle, but don't sell it. Unless you have another motorcycle and this is just a second one, you'll buy another.
If it were me and I am planning on selling both vehicles and paying off the credit card ..
I'd get written offers for both vehicles then talk to both lenders to find out what their requirements are for selling a vehicle that has a loan on it. You might be able to sell the motorcycle without having to pay it off first, saving you the 4.99% a month + insurance payments. Pay off enough on the truck where the balance is at or under what the written offer from Carmax is, saving some of the money for any further amounts due on either vehicle. Once both vehicles are sold and the loans are fully paid and closed then take any left over money and throw it at the credit card paying down the balance, and then fully paying off the credit card when you get your tax refund.
If both vehicle lenders are willing to work with you, and I don't see why they wouldn't, then you probably could have both vehicles sold and all three debts paid off within the next couple of months.
There's an automotive forum on here I believe, where you might ask about selling a vehicle that has a loan on it.
You might also read over the following link to get some ideas .. Sell a Car with a Loan - How to Get Rid of Financed Autos
To sell a car that is financed, the place buying it writes a check to the bank, the bank then waits their predetermined amount of days before releasing the lein on the vehicle in which case the new owner will be able to register it as theirs. It's very simple.
I'm going to go against the grain here and say "whichever one you will actually follow through on".
It sounds like you are much more motivated by Option A, whereas Option B sounds more like a "maybe I'll do this and maybe that'll happen" type scenerio. Therefore, I would take Option A
The interest on your CC between now and when your tax return comes back isn't enough, in my mind, to pass up the chance to sell your truck now and get $575/month off the table.
After some reflection, I went ahead and made a decision.
I decided to go ahead and pay-off my credit card balance of $4400 with the $5500. I took the $1100 remaining and scheduled a payment towards the motorcycle balance of $4500. I will have the bike paid-off in September, and as another Op suggested, sell the bike and use those funds to knock down the principal on my truck. Meanwhile, I'll keep making automatic payments on the truck.
I will be keeping track of my vehicle mileage until they are both sold. Currently, the truck has 87XX miles. The bike has 47XX miles. With a 2-3 mile commute to work everyday, and 30-40 mile road trips out of the countryside and into the city on the weekends, I'm going to assume that by the end of the year, I will have added about 800-900 miles on the truck. For the bike, I will have added about 20 miles (I've ridden it 4-5 times in the last 12 months in a state where you can ride most of the year).
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After some reflection, I went ahead and made a decision.
