Young Adults Crushed by High-Interest Car Loans
Young adults are struggling with high-interest car loans, often obtained out of necessity or desperation. These loans frequently involve used vehicles, leading to unexpected repairs and financial strain, making it difficult to maintain payments and build financial stability. Many feel trapped by unfavorable loan terms and limited options.
SOURCES (60)
“Clear all other debts as much as possible and refinance the truck, could maybe make it disappear in a Mercedes EV lease you can roll in negative equity and walk away when lease is over”
How about just trade it in for a cheaper more gas efficient vehicle?
“25% on a car loan shows they do not trust you to pay it back. having a history of paying back car loans but not paying back other loans means you have a history of not paying back loans. the lender doesn't care what kind of loans you let get behind”
“Why is it so bad? Someone with a 553 credit score should not be financing a car.”
“Almost universally cash. However if you are making more in interest than the auto loan is charging in interest, it might be better to take out the loan. Very seldom will that be the case, and even then there may be hidden costs, like having to carry more insurance.”
“Confident statement because you owe 18k on a car worth 16k to Carmax. They won’t just hand you a 16k check when there’s a lien on the car. Literally from the link you provided: “If your pay-off amount is more than our offer for your car, the difference is called “negative equity.” In some cases, the negative equity can be included in your financing when you buy a car from CarMax. If not, we’ll calculate the difference between your pay-off and our offer to you and you can pay CarMax directly.” So”
“Hello, I had a couple advice questions regarding my car. I'm currently 3 years into a 6 year loan for a Challenger where I'm paying $400 a month. At the time of purchase, I was able to afford comfortably, however it wasn't the smartest decision at the time. I have recently hit a tight spot with finances that is going to take a while to recover from, and I'm looking at ways to decrease how much I'm spending on a monthly basis. One of the biggest takeaways is my car payment and”
“What's the interest rate? It's good to have a bit of a cash cushion, but if it's over 4% I'd say yes. Then build the emergency fund back up to 3-6 months of expenses. If it makes you feel better, pay off half this month and try to get out of it within the next 2-3 months or so. Car payments are a wealth killer.”
“I owe about $10,500 left on my car. I currently have about 11,500 in my bank account. I want to pay off the rest so bad but idk if paying the whole thing off now is a good idea. I’ve been thinking about paying maybe about $8,000 on it, and trying to pay the rest off later. I really want this payed off soon because if I can I can start saving a good amount of money again. Thanks in advance. submitted by /u/manyquestions9 [link] [comments]”
“Chances are LOW that you get approved with a decent rate. You make $50k, already owe $29k, no mention of rent, other debt, and cost of living expenses. However simply based on current auto loan + insurance on $50k, I’m saying you will not be approved.”
“I can’t pay that loan off there’s legal stuff going on with that , that I can’t pay it off or else I would…. I just have the car sitting till they take it…. Lemon 🍋 hint hint”
“Why is the answer no ? I have a credit score of around 770 , last time it was ran before I got my second auto loan it was a 805 in all three parties”
“Monthly I’m paying about 550. And I was checking my app yesterday and it was saying how my principal is still super high. So I was calling around and that’s how I went down the rabbit hole. I’ve had my car for almost two years now and thought my loan would be almost low. But no every payment I have made had only went to interest. That’s why I feel scammed.”
“"balance" is definitely NOT the total of all remaining payments. "Payoff" is generally the total of the existing principal balance plus an amount of interest between the statement date and expected date of receiving the payoff payment”
“Going rate with credit unions right now (usually lower than banks) is around 4.5 to 5% so promotional apr is the way to go.”
“Here's my original post: https://www.reddit.com/r/personalfinance/comments/1uwui55/comment/oxoasc9/?screen_view_count=3 My update is that I was approved for a refi for 9.5% or I also was approved for a personal loan for 8.753%. I am considering using the personal loan to pay off the car loan, but the car isn't really worth a lot (maybe 5k or less) and I also have GAP insurance, so if the car gets totaled I won't owe anything, whereas I could still owe something on the personal loan a”
“I have a financed vehicle; 2021 Atlas with high mileage (130k), ~8k remaining on 0% interest loan through VW financial for another 10 months. The car has suffered a catastrophic mechanical failure, the dealership quotes the needed work (new motor) at $12k. The car is outside warranty coverage, there is not 3rd party coverage. Maybe this would be cheaper elsewhere, but either way, I'd be investing heavily into a car that will still have 130k miles on it. I need a car, paying for one that does”
“Looking into refinancing my car. Opened the loan December 2022. Original loan amount $19,685.31. 71 month term. Currently upside down in the loan. It was an older car with lower mileage and I shouldn't have taken the loan. Current balance $7,710.70 , 11.27% interest Refinance offer 9.50% interest same loan term. I'm have been paying more into principal payment for the last year and a half but I didn't very often when I first got the car. I plan to continue paying extra principal paym”
“I have a 20K car loan with a 7.5% interest rate, and a CC I used for a balance transfer with 0% APR for a year with about 3k on it. So I have 3K at my disposal without causing any alarms in other aspects of my life. However, it would leave me without much of an emergency fund for a while. I’m curious what you all would do. Do I keep it for emergency fund? Paying a chunk of the car loan would obviously be the greatest money saving option overall. But to be honest, I’m almost leaning towards clear”
Yeah I was thinking the same thing with the emergency fund.
“You’re making me feel a bit better about it, everyone is telling me I’m getting a good deal but my anxiety is telling me otherwise, first time having a car payment. I drove a free car for 6 years and babied it till it couldn’t drive anymore”
“I tried and I got offered 3.74% but I heard that there might be a catch, like don’t I have to repay sales tax or something? If I refinance it would get me down to $383/month for the car payment from $412. Worried it’ll hit my credit rating of 784 or something”
“That’s a good, reliable car that will last a long time with regular maintenance (don’t neglect oil changes). Try to pay a little more than the loan minimum every month to save on total interest. Also look into joining a credit union if they have better rates and refinancing. My credit union is currently offering 3.99% up to 66 months and 4.49% up to 78 months.”
“Hey OP, lots of great advice in the comments, so I'll try and keep it brief. What stood out to me was that 7% interest on your loan is on the high side. If you have already shopped around the local credit unions out there then please disregard my comment. It would be worth getting a few more quotes. It won't get you under that $700 dollars over BAH, but it could knock it down a couple hundred bucks. Best of luck to you and your spouse in your upcoming move!”
“I’m still learning how personal finance works, so apologies if this is a dumb question. I’m in my early 20s and financed a car for about $7,400 at 32% APR with a $250 monthly payment. I can manage the payment, but my full coverage insurance is almost $500/month, and that’s what’s really killing my budget. I was recently offered a title loan that would pay off my current auto loan, using the car itself as collateral. My thought was that if I owned the car outright through the title loan, I could”
“I'm sure I'm overthinking this but the current car I have is upside down with apx 9.2k still owed and a Kelley Blue Book trade in value of apx 4K. My initial plan was to pay it down to at least equal that value if not completely off before attempting to trade it in but the dealership I'm getting the new car from is telling me I don't need to bother with that because I can still traded in and just pay them the difference. My question is hopefully a simple one. Is there any reason”
“While PNC Bank was “working with” the car dealership for 7 months to procure a title I was attempting to refinance for a lower interest rate at my local credit union. If you didn’t know, you can shop for a better loan rate within 30 days of loan origination without taking a hit to your credit. (I have to add this; as a former employee of PNC I learned this in training) So yeah, PNC admitted to the CFPB that they began “working with” Blaise Alexander Ford of Mansfield TWO months after my purchase”
“You are correct that any over payment goes to principal. But saying that’s not how you pay loans is just dumb. In fact paying ahead is the best way to pay loans. And most if not all auto finance companies deduct over payments from the following payment due. West lake does but it just doesn’t update until the statement after the payment is generated. Do not take any advice from this guy”
“I’m 21 and don’t want to go into detail about everything that got me here but long story short, I fucked up, missed payments on my car and got it repossessed. I already know I’m an idiot for getting myself into this situation, I just need advice on getting out of it. The car is my only transportation to work so I’m trying to get it back as soon as I can. I make about $700-$800 weekly and have a 594 credit score and am just trying to find the safest option that isn’t going to fuck me over even ha”
“Hi everyone! I'm currently trying to get approved for an auto loan, but I was denied by a credit union because of my debt-to-income (DTI) ratio. Does anyone know of any lenders that focus more on your monthly debt payments compared to your monthly income, rather than your total outstanding debt? Or if you've been approved for a car loan with a high DTI, I'd really appreciate hearing about your experience and any recommendations. My only debt is student loans. I'm in my first year”
“To tag on: Do you have gap coverage on the car, OP? Depending on the mileage/value of your car relative to the value of the loan, you could be forgoing some level of financial protection.”
“If you had payments and are in a state where gap is accepted I would go that route… unless your handy with tools and cars this looks like a crazy fix”
“you need to speak to a financial advisor. you are not financially literate, ask your grandparents for help and advice”
“Finished paying off my car the other month, and I wanted to get my new finances sorted because my old budget was heavily weighted to pay my car off quicker. The plan is, if I stick to the $600 savings per month, I'll be able to have enough for a vacation with my lady in September. The -3000 in August is for a ring, but I'll likely only use a portion of that based off what I've looked at so far, so the trip will likely have a bit more buffer money. Investments are already taken out of”
“My local credit union approved me for an 84 month 6.5 rate used car auto loan. However I’m buying a car out of state from an Audi dealership and they are unwilling to send funding until the title is completely signed over to them. The dealership say they will not sign over the title but they will sign a document stating that the title will be signed over as soon as funding is done. The local CU is standing firm on the request. Is this normal from them? What options do I have aside from just find”
“Traditional walk in banks, sure, but its because they expect low APR if they approve you. Most dealers that use banks for lending have the ability to pool loans and this allows them to do loans as low as $500.”
“My loan just passed a year old through Bridgecrest which is notoriously predatory I have about 5 years left on the car and owe about 4x what Carfax keeps telling me it's worth with a 17% interest rate (sadly far from the worst deal I've seen among my friend group) I think my credit score is thoroughly in the "good" range now and when I bought it, my credit score was at a spot where the Internet said that statistically 40% of people in that range fault on their loans in the firs”
“Go to a branch office to complete the deal. If that’s not possible, then I’d move on. Also, as an alternative .02 cents, I’ve gotten competitive offers from Carmax/Kelly Blue Book/Shift before an I encourage everyone to do the same. Literally there have been instances where I get a cash offer from them, try selling to private owners for a few grand more and just end up selling to Carmax/Kelley Blue Book/Shift because private sellers aren’t offering more.”
“Have you tried trading your car in on a lower-priced vehicle that would get your payments down? You allude to some sort of issue with Westlake Financial, but I’m not familiar with them. What is it that you “entered into” with them? What is it that keeps you from being able to afford to move? Deposit, first and last payment for the new place? Maybe you could negotiate with your landlord to keep your rent at the same level it was as you search for a new place? Do you have family or friends you cou”
“I would add from my own life experience -- as I was in a similar situation not long ago. It is amazing once you are debt free to be able to spend money you would otherwise spend on car payments to spend on experiences making memories with your kids, and doing it without guilt and money anxiety. Good luck!”
“Yeah try and get out of that loan asap. Really your only option is to pay it off. Anything you’d save in interest by getting a better loan is probably going to eaten by the other payments. I really doubt you’ll be able to get a good loan 3% or less. Maybe in a few years if you have better habits. A 2024 Camry is not an old or unreliable vehicle if you care for it, I agree with the others keep it until the repairs cost too much.”
“Pay 2k a month plus the lump sum until you get down to 80% value then refi. Continue until the vehicle is paid off. Dont think about trading or buying something for your kid until the time comes. You can decide the best option then.”
“Drive the car til it no longer works. Fix it until it’s no longer financially feasible. A Toyota can last 10 years. A 2024 Toyota Corolla is not old…. Refi it when you can.”
“I need to help out with the wife's credit. I "own" everything, since she can't really get on a loan without the APR tripling. Anyway, we had an awful car accident, and my new car was destroyed. Then it took insurance close to four weeks to pay for the car. What would have happened if I tried to refi the wrecked car into the wife's name, at virtually any rate, knowing it was about to be paid off? If this is even possible, her credit score would have gone up an insane amount!”
“I would do both. Extend the terms a bit, and increase the down payment if I could afford to. You can check the difference between interest costs on the shorter loan with smaller down payment vs the longer and ride that curve until you find a spot that feels better for you.”
“My daily commuter vehicle has developed repairs that make it unwise to continue repairing it. I have a vehicle so its not an emergency to replace the daily but gas prices makes it so that it needs to not be long term. Anyways, I have excellent credit and normally would just finance a new(ish) car through my bank or the dealership based on best rates. But my employer said he took a loan out against his 401(k) and is encouraging me to do the same so I pay the interest back to myself. I've neve”
“Do not be car pool. That interest rate is okay but an 84mo plan and $500/mo is too high. You won’t be able to maintain that kind of payment and move out to cover a rent or something within the few years you’ll want to leave home. Another consideration is mileage. How many miles are you putting on the car per year? I agree what others have said, invest in a cheaper but stable car. Look for much lower monthly payment. Don’t be car poor at 21.”
“Why lease instead of financing something? Neither is ideal, but financing at least gives you some equity/ownership Edit: as others have already said, the deal sucks btw”
“Absolutely not. $900 car payment when you have thousand in credit card debt is a bad idea. Use the old car until it breaks and you pay your debts. Then Get another cheap car so you can build savings”
“I'd rather pay somebody who knows what they are doing than risk breaking my car even more and making it more expensive when I don't even know what the parts in my car are 🤷”
“i bought a car from a dealership in April, got my loan thru Westlake. my payments are due on the 29th of each month and i’ve never been late. last month 6/29/26 i missed my payment and was working on paying it. (mind you before this i was never told where and how to pay it, fought tooth and nail to figure it out.) anyways i was working on paying it and they are literally harassing me with over 10 phone calls a day, all coming through different phone numbers and every time i answer it’s a horribl”