A friend of mine recently told me about being in financial turmoil. It all started when her car had a problem and she decided to buy a new one. Unfortunately, things didn’t go according to plan and her checking account took a big hit.
I will explain what happened.
Buying a new car before selling the old one can be a disaster
When my friend decided to buy a new car, she wanted to move forward as quickly as possible because she was tired of dealing with unreliable cars. So here’s what she did.
When she looked up the current estimated price of the car online, she found that the car was valued at just a little more than what she owed. With this information, she went to an auto dealer and bought a new car. They didn’t offer the amount she wanted to trade in her car for, and the amount offered wouldn’t have been enough to pay off her car loan. So she decided to sell her existing car privately. rear she bought a new one
Even though she still had a current car loan, the car dealer approved her a loan for a new car, and she left with a shiny new car and a new car payment to go along with it. Then came the problem.
This big problem caused economic turmoil
It turns out that no one is willing to buy my friend’s car online or anywhere near that price. In fact, the best offer she got left her more than $2,000 short of what she needed to pay off her car loan.
So my friend is now stuck with a car that he can’t sell for enough to pay off the loan. And not only does she not have the money to pay the difference, again Her credit record shows she is heavily in debt due to two car loans, so she is unable to qualify for a personal loan or credit card to pay off the additional $2,000.
Sadly she has no choice but to keep both cars and Continue paying for both cars until you have enough money to cover the difference between the car’s value and the amount owed. She’s used up most of her extra income on paying for her two cars, so perhaps it’s possible. Year before that happens.
Make sure to avoid the mistake my friend made
The mistakes my friend made can happen to anyone, but there are ways to avoid them.
First, if you’re looking to buy a new car, don’t proceed until you’ve actually sold your old car. This may mean you may be without your car for a few days, but it’s better than being stuck in a situation like this.
Second, don’t assume that just because you’ve been approved for a car loan, you can afford it. A friend of mine should have never been approved for that second loan when he still had the first one, but the car lender didn’t care at all whether it would cause you financial hardship. I don’t care.
Third, when you buy a car, aim for the shortest payment term you can afford, and pay a large down payment to avoid being submerged in the first place.
Doing any or all of these three steps will help you stay out of the mess my friend is in. I wish I could have given her this advice before she hit her financial crisis.
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