What to do when you want to get rid of a vehicle that you are still making payments on?

Question

I have a motorcycle that was put on a credit card. It had a promotional APR until 2009. Ive made purchases, which my salesman didnt mention the APR for purchases was 24.99%. So I made purchases for motorcycle parts/accessories (about $1500). My bill got a little higher b/c of the APR & purchases. Well, I recently got into a wreck and was out of work... I fell behind on my motorcycle by 2 payments (causing my promotional period to end and the motorcycle APR skyrocketed to 24.99% as well). I also fell behind on my other credit card by one payment. But I paid off my credit card completely now, and put $500 towards my motorcycle payments. I received a new statement that says my bill jumped from $127/mo to $189/mo... and finance charges are $163 out of the $189. I called the company... and they said they cant do anything unless Im on time for 12 months, then my APR will go down to 11.90% for the motorcycle (and not purchases)... or refinance.

Im afraid I cant refinance for the two negatives on my credit report. I currently owe $6700 for the motorcycle and purchases together. But I dont want to pay $20/mo to my actual stuff and $160 to finance charges...Its ridiculous.

What can I do to either get rid of the motorcycle and payments... or to get lower payments? Anyone know of places that will refinance a lower credit score/report rating for a decent APR?

Answer 1

I used to work for the credit card department of a bank. It was in the UK, but I think things are similar.

Basically, if you miss two payments, that is a bad black mark on your credit file and you may struggle to get credit elsewhere. I am not suggesting you don't try, but with the credit crunch meaning banks are tightening up their lending then you may have a hard time finding a cheaper rate.

You could consolidate the debt into a loan which is typically cheaper, but with a two month arrears they may be unwilling to lend to you.

Since it is a credit card and not a hire-purchase arrangement you cannot hand back the motorbike and walk away from the deal.

The only options are to see if you can get cheaper credit elsewhere, or else sell the bike and then pay off the rest of the balance if there is a short fall.

It sounds like they sucked you in to a really bad deal. I would ignore their assurances that the rate would go down after one year as unless you have something in writing then the bank does not have to honour it. When I was working in the bank, we could not even promise customers their APR would be decreased as we simply did not know as the bank changed its policies all the time.

Banks will try and s***w you any chance they get!