Turn It In And Lose

It's not just Natasha's super-high car loan interest rate that she needs to work on.

QUESTION: Natasha wants out of debt and is willing to sacrifice, but she only makes about $18,000 a year and is paying 15% interest on an auto loan, and that car was wrecked. If it’s fixed, it’s worth $11,000, but she owes $14,000 on the car loan. She just wants to turn it in and focus on her other debts, but Dave tells her why not to do that; it could cost her in the long run.

ANSWER: Don’t do that. Fix the car and get it sold. If you turn the vehicle in, they will sell it for nothing and sue you for the difference. You lose control of what it sells for. If it was fixed and worth $11,000, they would sell it for $8,000, which would leave you with a $6,000 spread to cover. You’re better off to do the hard work of shining this automobile up and selling it yourself, rather than turning it in. Fix it and sell it for as much as you can sell it for. You also need to find some ways to get your income up.