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He basically just needs to sell the car, and use the proceeds to pay off the remaining principal balance of the loan. That won't hurt his credit at all.
As Meionted he can sell the car and pay off the loan. He cannot sell the car and continue to make payments on the loan, because no one will buy the car unless the loan is realsed. In some cases, he can also trade the car in on a new car or a newer car, and roll the ovreage on the loan into the new car loan. However, when you do this, you end up paying a whole lot more and at a higher interest rate.
He cannot just "cancel' the loan. When he borrowed themoney to buy the car he made a deal. He promised to reapy the moeny with interest if they loaned him the moeny to buy the car. He cannot just walk away from that promise. Even if the car were stolen or destroyed, he still must repay the loan (either form insurance proceeds or by paying out of his income). A loan on a car is not rent for the car. He owns the car and the lender owns the debt which he must repay. They are completely seperate except that the car is used as a guarantee of part of the debt.
He might be able to get a credit work out company to help him get reduced payments, or get some credit for high interest payments he alread made. I am nto sure how much those groups can actually do. Most of them are scams.
Your friend signed a legally binding contract and needs to man up to his obligations. A voluntary repo messes up credit just as bad. Sell the car or keep it.
This was touched on in a prior post but I wanted to extrapolate a bit more. If the price potential buyers are willing to pay on the car is less than what is owed to the bank, the seller needs to have the difference available as cash during the sale because no one will buy a car with a bank lien on it. It is a sketchy situation because the seller will not have the title in hand.
If the amount owed is not terribly significant, the bank may release the lien on the car, and allow your friend to make payments on the remaining balance as a signature loan. This would work if the loan is with a bank. If not, he should find out the difference, and either have cash on hand, or an arranged signature loan from his credit union or bank for the difference to pay the vehicle finance company at the time of sale. That's what I meant earlier when I said he could continue to pay off the remaining balance, after the car is sold, but it was late when I was typing...and I don't think it came out as clearly as I had thought.
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All the world's a stage, and all the men and women merely players: they have their exits and their entrances; and one man in his time plays many parts, his acts being seven ages.
~William Shakespeare (As You Like It Act II, Scene VII)
If the amount owed is not terribly significant, the bank may release the lien on the car, and allow your friend to make payments on the remaining balance as a signature loan. This would work if the loan is with a bank.
He's six months into a five-year note with a $573 payment. I'm guessing the payoff is pretty significant, probably close to $30K.
He's six months into a five-year note with a $573 payment. I'm guessing the payoff is pretty significant, probably close to $30K.
The difference is the amount to which I was referring, from the sale value and payoff amount. If it's $3-$5k, he should be able to obtain a signature loan for the difference, and make payments on that, as opposed to having the full value in cash.
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All the world's a stage, and all the men and women merely players: they have their exits and their entrances; and one man in his time plays many parts, his acts being seven ages.
~William Shakespeare (As You Like It Act II, Scene VII)
Why did you*cough***cough*I mean your friend buy the car in the first place?
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