GWP: Personal experiences with loans
Today, I am joining the PF Blogger’s Extended Group Writing Project and writing about my personal experience with loans.
For the most part, my experience with loans has gone about as well as can be expected—with one notable exception. My seemingly ordinary auto loan has a deep dark secret: it contains the remains of bad car loans’ past.
Mistake 1: It all started when I lost my mind and decided to trade in my trusty Toyota minivan for a way cooler used Volvo station wagon.
Mistake 2: Due to my habit of running into the side of the garage, my minivan had some minor cosmetic issues. And even though it was worth less than I’d hoped, I decided to move forward.
Mistake 3: The fact that I didn’t actually have the money to make up the difference between what the minivan was worth and what I owed wasn’t enough to stop me from signing the papers.
Mistake 4: I financed the old, used Volvo (plus the $1,800 deficiency balance) for five years.
Mistake 5: Two years later, my station wagon needed a new (very expensive) engine. Instead of fixing it, I sold it for next to nothing.
Mistake 6: I paid half of the now $4,200 deficiency balance off from my savings account, and rolled the rest into my new car loan.
Mistake 7: My new car is a giant SUV that has dramatically decreased in value every second since I have owned it.
Bottom line? I am upside-down on my car by more than $5,000 (and gas is costing me a bundle!) And I’m not alone. According to Kelley Blue Book, 29 percent of consumers were upside down on their vehicles in the first part of 2007. On average, people traded in cars on which they still owed more than $3,600.
To avoid this scenario, my best advice is to keep whatever car you currently have as long as possible. If you must to get a new car, remember that it is a depreciating asset and (if you can’t pay cash) try to pay it off as quickly as you can. If you aren’t convinced by my story, read this article from The Motley Fool titled “Don’t Do It!”
To read more personal loan stories, check out The Personal Finance Blogger's Network.