A little more information about the car, please. What is the Kelly Blue Book value? You can find it at www.kbb.com. Not the trade in value, but the seller’s private party value.
1. If the car is worth the same or more than Kelly Blue Book, I’d stick a sign on it and park in a high traffic area and sell it FAST!
2. But….if the car is worth a LOT less than the payoff, I’d try to get an unsecured loan for the difference and then sell the car. For example: if the car is worth $10,000 and she owes $12,000, she would get an unsecured loan for $2,000 or borrow it from someone. A $2,000 debt is a lot less stressful than a $12,000 one with insurance. Then for 3 months I’d walk, take the bus, or hitch rides from friends until I’d put the $500 a month in savings and buy a $1,500 car outright cash, then use the $500 for 4 months to payoff the unsecured loan and be done with the whole thing. I’d recommend a 1994 Honda or Toyota. They are very reliable and usually last 250,000++ miles!
The biggest thing to remember is to NOT bury your head in the sand and ignore the problem. Don’t trade it in and get upside down on another car. You can get out from under this debt fast if you continue to put the money toward the unsecured loan and a savings account for only 7 more months or so. That’s a lot less time than 4 or 5 more years that you had left on the car loan. What a relief it would be not to have that big car payment. After you save up for the used car, then start a car fund and put $100 a month or whatever you can afford into a money market account getting 5% and when you save up enough money again, PAY CASH!!! In 5 years, you will have saved up $7,000. If you can put more than $100 a month it will go faster or you will have more saved. Get your money to work for you by using the bank’s interest to pay you instead of borrowing money and having to pay it back with interest.
I strongly recommend you borrow the book Total Money Makeover by Dave Ramsey from the library. You will learn that if you flash cash you can get a great bargain on a good used car too. Take $100 crisp clean bills with you when you go to look at good used cars.
He changed my way of thinking about money, credit cards, borrowing, and car payments forever! You are young and can change your family’s future by saving, investing, and living within your means now. You have a little one on the way and you need to think about your family’s future and not just the here and now.
It sounds like you are on the right track getting out from under this car you and your fiancé can’t afford. It will free you so that you can concentrate on the wonderful experience of being pregnant!! I have three beautiful children and they are such a blessing. Right now my dh and I are digging our way out of $70,000 worth of debt. When we are debt free, we will truly be free forever!
Good luck and let me know if you have any more questions. I’d be happy to answer or clarify anything!