Car Accident

KAdams767 · February 2016

I'm sorry about the accident. I agree with others that you probably should look at spending a bit less on a new car, given your current situation. I know it's harsh, but there's always going to be something like this, where you can justify spending more because of "safety" or whatever else. But getting a slightly older or less expensive car, skipping the SUV, is not a big deal. Especially given that you are currently in major debt payoff mode and have no savings. This isn't the time to take on a large car loan needlessly. Also, I think you need to do some more research. A Subaru Outback is a great car, I drive one, but good gas mileage is not one of its features, lol. It's an AWD vehicle and is not particularly fuel efficient. I wouldn't pick that if gas mileage is even a consideration, which it sounds like it is for you.

formerlyGDaisy09 · February 2016

KAdams767 said:

I'm sorry about the accident. I agree with others that you probably should look at spending a bit less on a new car, given your current situation. I know it's harsh, but there's always going to be something like this, where you can justify spending more because of "safety" or whatever else. But getting a slightly older or less expensive car, skipping the SUV, is not a big deal. Especially given that you are currently in major debt payoff mode and have no savings. This isn't the time to take on a large car loan needlessly. Also, I think you need to do some more research. A Subaru Outback is a great car, I drive one, but good gas mileage is not one of its features, lol. It's an AWD vehicle and is not particularly fuel efficient. I wouldn't pick that if gas mileage is even a consideration, which it sounds like it is for you.

yep! this is because of its symmetrical all wheel drive; it's all wheel drive all the time. I'll get 33-35 miles to the gallon if i recently had an oil change and go on a trip that's all highway; however this winter with my 3 mile commute to work that includes 5 traffic lights I get about 18 miles to the gallon.

vlagrl29 · February 2016

Just my opinion but with the 13k I think you can easily find a newer used car that will very much please you. I would not go into further debt.

jtmh2012 · February 2016

KatieCutie05 said:

I have been having doubts about this whole DR plan before this. we have 77k in student loans left. 16k and the 61k. the soonest we could do is 3 years to get that paid off.

If you don't mind my asking. What are the interest rates on these two loans? Especially the $16k one?

KatieCutie05 · February 2016

jtmh2012 said:

KatieCutie05 said:

I have been having doubts about this whole DR plan before this. we have 77k in student loans left. 16k and the 61k. the soonest we could do is 3 years to get that paid off.
If you don't mind my asking. What are the interest rates on these two loans? Especially the $16k one?

16k one is in my name - 6.5% interest

the 61k loan is a parent plus loan in my moms name (my responsibility) its separated into 6 smaller loans by billing group and i actually have 2 different payments for it. those average about 7.8% interest.

brij2006 · February 2016

KatieCutie05 said:

jtmh2012 said:

KatieCutie05 said:

I have been having doubts about this whole DR plan before this. we have 77k in student loans left. 16k and the 61k. the soonest we could do is 3 years to get that paid off.
If you don't mind my asking. What are the interest rates on these two loans? Especially the $16k one?

16k one is in my name - 6.5% interest

the 61k loan is a parent plus loan in my moms name (my responsibility) its separated into 6 smaller loans by billing group and i actually have 2 different payments for it. those average about 7.8% interest.

You know, take $8k from the accident to put toward that $16k loan and buy yourself a $5k vehicle. That $16k loan is now cut in half and you've cut off 5 months from your debt payoff timeline (IIRC you said you put 1,600/month toward debt). You're now down to 2.5 years instead of 3 years till you're out of debt.

Just saying.

*I'm like that little angel on your shoulder saying "be good Katie, stay the course, you know what to do to win."

formerlyGDaisy09 · February 2016

brij2006 said:

KatieCutie05 said:

jtmh2012 said:

KatieCutie05 said:

I have been having doubts about this whole DR plan before this. we have 77k in student loans left. 16k and the 61k. the soonest we could do is 3 years to get that paid off.
If you don't mind my asking. What are the interest rates on these two loans? Especially the $16k one?

16k one is in my name - 6.5% interest

the 61k loan is a parent plus loan in my moms name (my responsibility) its separated into 6 smaller loans by billing group and i actually have 2 different payments for it. those average about 7.8% interest.

You know, take $8k from the accident to put toward that $16k loan and buy yourself a $5k vehicle. That $16k loan is now cut in half and you've cut off 5 months from your debt payoff timeline (IIRC you said you put 1,600/month toward debt). You're now down to 2.5 years instead of 3 years till you're out of debt.
Just saying.

*I'm like that little angel on your shoulder saying "be good Katie, stay the course, you know what to do to win."

This is a good point. Even hitting anywhere in the middle ($5000-$16,000) you're not coming out of this with more debt, and you aren't adding any monthly payments to your budget that are going to extend your debt pay-off! did you owe anything on the car that was totaled?

jtmh2012 · February 2016

KatieCutie05 said:

jtmh2012 said:

KatieCutie05 said:

I have been having doubts about this whole DR plan before this. we have 77k in student loans left. 16k and the 61k. the soonest we could do is 3 years to get that paid off.
If you don't mind my asking. What are the interest rates on these two loans? Especially the $16k one?

16k one is in my name - 6.5% interest

the 61k loan is a parent plus loan in my moms name (my responsibility) its separated into 6 smaller loans by billing group and i actually have 2 different payments for it. those average about 7.8% interest.

Well, the group may kill me for this, but I personally have no issues with debt-leveraging if it makes sense. Now keep in mind, this completely depends on your current credit score and being able to get the best rates.

I just looked up my bank. They're offering 2.49% on a new car, 3.09% on a reasonably new yet still used car (2015-2017 per my bank). This is lower than your current loan rates.

I'd use the insurance payout to pay off as much of the $16k loan as you can and then get a loan for the car, but keep that loan payment as low as you can. So yes, you still have a loan, but you're paying lower interest on that loan which means more going towards principal.

formerlyGDaisy09 · February 2016

jtmh2012 said:

KatieCutie05 said:

jtmh2012 said:

KatieCutie05 said:

I have been having doubts about this whole DR plan before this. we have 77k in student loans left. 16k and the 61k. the soonest we could do is 3 years to get that paid off.
If you don't mind my asking. What are the interest rates on these two loans? Especially the $16k one?

16k one is in my name - 6.5% interest

the 61k loan is a parent plus loan in my moms name (my responsibility) its separated into 6 smaller loans by billing group and i actually have 2 different payments for it. those average about 7.8% interest.

Well, the group may kill me for this, but I personally have no issues with debt-leveraging if it makes sense. Now keep in mind, this completely depends on your current credit score and being able to get the best rates.
I just looked up my bank. They're offering 2.49% on a new car, 3.09% on a reasonably new yet still used car (2015-2017 per my bank). This is lower than your current loan rates.
I'd use the insurance payout to pay off as much of the $16k loan as you can and then get a loan for the car, but keep that loan payment as low as you can. So yes, you still have a loan, but you're paying lower interest on that loan which means more going towards principal.

there's the trade that the interest paid on the student loan is tax deductible if you itemize your taxes (can't remember if you rent or own @katiecutie05), but if you're not itemizing you might save yourself some interest by using the insurance payout to pay off that one student loan and finance a car that's under $16K.

jtmh2012 · February 2016

formerlyGDaisy09 said:

there's the trade that the interest paid on the student loan is tax deductible if you itemize your taxes (can't remember if you rent or own @katiecutie05), but if you're not itemizing you might save yourself some interest by using the insurance payout to pay off that one student loan and finance a car that's under $16K.

Good catch. I couldn't itemize the last time I had student loans, so it wasn't even a factor.

I suggested the $16k loan as it was smaller and could be done away with. Might be worth looking at the $77k one, but the math might be more work there and depend on your payment structures. ie. would retiring one or two of the sub loans reduce your payments enough to account for the car loan?

formerlyGDaisy09 · February 2016

jtmh2012 said:

formerlyGDaisy09 said:

there's the trade that the interest paid on the student loan is tax deductible if you itemize your taxes (can't remember if you rent or own @katiecutie05), but if you're not itemizing you might save yourself some interest by using the insurance payout to pay off that one student loan and finance a car that's under $16K.

Good catch. I couldn't itemize the last time I had student loans, so it wasn't even a factor.
I suggested the $16k loan as it was smaller and could be done away with. Might be worth looking at the $77k one, but the math might be more work there and depend on your payment structures. ie. would retiring one or two of the sub loans reduce your payments enough to account for the car loan?

there are additional benefits built into student loans like the ability to put them into deferment if you go back to school (not sure if that's part of your plans @katiecutie05), plus if the federal government were to ever roll-out anykind of loan forgiveness plan if she trades her SLs for a car loan she wouldn't be able to take advantage of that (again probably unlikely this would happen in the next 3 years).

julieanne912 · February 2016

jtmh2012 said:

KatieCutie05 said:

jtmh2012 said:

KatieCutie05 said:

I have been having doubts about this whole DR plan before this. we have 77k in student loans left. 16k and the 61k. the soonest we could do is 3 years to get that paid off.
If you don't mind my asking. What are the interest rates on these two loans? Especially the $16k one?

16k one is in my name - 6.5% interest

the 61k loan is a parent plus loan in my moms name (my responsibility) its separated into 6 smaller loans by billing group and i actually have 2 different payments for it. those average about 7.8% interest.

Well, the group may kill me for this, but I personally have no issues with debt-leveraging if it makes sense. Now keep in mind, this completely depends on your current credit score and being able to get the best rates.
I just looked up my bank. They're offering 2.49% on a new car, 3.09% on a reasonably new yet still used car (2015-2017 per my bank). This is lower than your current loan rates.
I'd use the insurance payout to pay off as much of the $16k loan as you can and then get a loan for the car, but keep that loan payment as low as you can. So yes, you still have a loan, but you're paying lower interest on that loan which means more going towards principal.

I actually agree w/ you on this... the interest on a shorter term 16k car loan (assuming she qualifies for the optimal interest rate) will be much less than on one or two of those student loans.

And, this isn't very MM at all for many people, including myself, but I always like to have a nicer car. I always have a long commute (currently it's about 40 minute each way assuming I don't run into any accidents), and if I'm going to spending an hour plus every day in my car, I want it to be comfortable and reliable. Cheap cars just aren't, I've gone that route before.

brij2006 · February 2016

Eh, they've already put in the work for 2 years on getting out of debt. Sold off her H's truck that he loved so they could get rid of that debt, cut a ton of stuff, cash flowed the birth of their child, and used a small inheritance to get themselves ahead on the debt. Why throw that hard work away by taking on more debt?

The numbers and math may add up to debt leverage, however, in their case it just seems dumb to go further into debt because of "math." When it's clearly a mental and behavior thing for them. In their case, I will still recommend to ignore the math and do what they have been working so hard to get ahead with these past 2 years. Taking out another $13k in debt at a lower rate than the 6.8% student loans, isn't going to help them get closer to being out of debt. They may save some money in interest, but trading 1 payment for another isn't going to get them to their end goal of getting out of debt as quickly as possible.

formerlyGDaisy09 · February 2016

brij2006 said:

Eh, they've already put in the work for 2 years on getting out of debt. Sold off her H's truck that he loved so they could get rid of that debt, cut a ton of stuff, cash flowed the birth of their child, and used a small inheritance to get themselves ahead on the debt. Why throw that hard work away by taking on more debt?

The numbers and math may add up to debt leverage, however, in their case it just seems dumb to go further into debt because of "math." When it's clearly a mental and behavior thing for them. In their case, I will still recommend to ignore the math and do what they have been working so hard to get ahead with these past 2 years. Taking out another $13k in debt at a lower rate than the 6.8% student loans, isn't going to help them get closer to being out of debt. They may save some money in interest, but trading 1 payment for another isn't going to get them to their end goal of getting out of debt as quickly as possible.

if they were, theoretically, to pay off the $16K student loan with the insurance pay-out and finance a $12k car at a lower rate they've both lowered their debt by $4K and decreased the amount of interest they will pay. but that is only IF the secure a car loan at a low interest rate AND choose to buy a car that costs less than $16K

brij2006 · February 2016

formerlyGDaisy09 said:

brij2006 said:

Eh, they've already put in the work for 2 years on getting out of debt. Sold off her H's truck that he loved so they could get rid of that debt, cut a ton of stuff, cash flowed the birth of their child, and used a small inheritance to get themselves ahead on the debt. Why throw that hard work away by taking on more debt?

The numbers and math may add up to debt leverage, however, in their case it just seems dumb to go further into debt because of "math." When it's clearly a mental and behavior thing for them. In their case, I will still recommend to ignore the math and do what they have been working so hard to get ahead with these past 2 years. Taking out another $13k in debt at a lower rate than the 6.8% student loans, isn't going to help them get closer to being out of debt. They may save some money in interest, but trading 1 payment for another isn't going to get them to their end goal of getting out of debt as quickly as possible.

if they were, theoretically, to pay off the $16K student loan with the insurance pay-out and finance a $12k car at a lower rate they've both lowered their debt by $4K and decreased the amount of interest they will pay. but that is only IF the secure a car loan at a low interest rate AND choose to buy a car that costs less than $16K

They're getting $13k from insurance. So there would still be a $3k difference on the student loan, then taking out $13k for a car.

It's really just transferring the risk from 1 place to the next.

But they would save even more in interest if they were to buy a $5k vehicle with cash and pay the student loan down by $8k.

brij2006 · February 2016

Also, we're really only talking a few dollars difference in interest if they're putting $1,600/month toward debt. If they were to debt leverage, either way the student loan and/or car would be paid off within 10 months. So we're talking a very small amount between 2.4% and 6.8% interest for the next 10 months.

But again, if they took $8k and paid off half of that student loan, we're talking a much larger savings than the debt leverage option.

Correct, they won't have as fancy of a car for $5k, but it's just temporary. It doesn't mean she has to drive that car for the next 10 years. It's solely while getting out of debt.

formerlyGDaisy09 · February 2016

brij2006 said:

formerlyGDaisy09 said:

brij2006 said:

Eh, they've already put in the work for 2 years on getting out of debt. Sold off her H's truck that he loved so they could get rid of that debt, cut a ton of stuff, cash flowed the birth of their child, and used a small inheritance to get themselves ahead on the debt. Why throw that hard work away by taking on more debt?

The numbers and math may add up to debt leverage, however, in their case it just seems dumb to go further into debt because of "math." When it's clearly a mental and behavior thing for them. In their case, I will still recommend to ignore the math and do what they have been working so hard to get ahead with these past 2 years. Taking out another $13k in debt at a lower rate than the 6.8% student loans, isn't going to help them get closer to being out of debt. They may save some money in interest, but trading 1 payment for another isn't going to get them to their end goal of getting out of debt as quickly as possible.

if they were, theoretically, to pay off the $16K student loan with the insurance pay-out and finance a $12k car at a lower rate they've both lowered their debt by $4K and decreased the amount of interest they will pay. but that is only IF the secure a car loan at a low interest rate AND choose to buy a car that costs less than $16K

They're getting $13k from insurance. So there would still be a $3k difference on the student loan, then taking out $13k for a car.
It's really just transferring the risk from 1 place to the next.

But they would save even more in interest if they were to buy a $5k vehicle with cash and pay the student loan down by $8k.

gotcha. I had numbers confused and somehow thought they were getting more for the car.

julieanne912 · February 2016

@katiecutie05, I found you a vehicle... and it's something you could pay cash for https://denver.craigslist.org/cto/5461620373.html

(BTW this is totally intended as a joke)

KatieCutie05 · February 2016

H just doesnt want a p.o.s. car. he has always been a "buy once, cry once" type so i doubt i can talk him into a 5k car that we r just gna need to replace before we can afford to anyway.. id like to stay below 16k but H is willing to go up to 20k for the right vehicle that will last us longer. We were going to go see the 2014 forester today but it was sold last night. we figure thats Gods way of telling us no.

And H thinks he can get a 2.5% loan at the credit union so we have thought about putting the 13k to the SL instead but its really not saving us a whole lot- but atleast we wouldnt have 2 payments. If we could get a 15k car though id find a way to pay cash.

we have until the 2nd with the rental and H is working on saturday and we still dont know what car to get.

brij2006 · February 2016

In that price range, also look on Craigslist and cars.com. You would be shocked how many people you find that are looking to get rid of their payment on their vehicle and are happy to accept cash (or cashiers check). We've actually found better deals, private party.

dragonstarjk · February 2016

KatieCutie05 said:

H just doesnt want a p.o.s. car. he has always been a "buy once, cry once" type so i doubt i can talk him into a 5k car that we r just gna need to replace before we can afford to anyway.. id like to stay below 16k but H is willing to go up to 20k for the right vehicle that will last us longer. We were going to go see the 2014 forester today but it was sold last night. we figure thats Gods way of telling us no.

And H thinks he can get a 2.5% loan at the credit union so we have thought about putting the 13k to the SL instead but its really not saving us a whole lot- but atleast we wouldnt have 2 payments. If we could get a 15k car though id find a way to pay cash.

we have until the 2nd with the rental and H is working on saturday and we still dont know what car to get.

Define POS car though. I mean....okay, maybe you don't buy a $5K car, but you could find a really nice, safe, used vehicle for under $15K, easy. Just be more open-minded about exactly which vehicle you want.

I drive a 2012 Chevy Cruze LTZ. I'm a bit OCD when it comes to my vehicle, so this car is in immaculate condition. If I were to trade it in, you would think it's a brand new car. You would also be able to buy it for under $15K. It has excellent safety ratings, excellent gas mileage, and the backseat is no problem getting in and out of (I have had my niece ride back there with her car seat several times). So, maybe the key is to just do more shopping and keep an eye out for a better deal.

Don't feel pressured that you HAVE to buy one of these two vehicles that you are looking at, there are a lot more cars for sale in the world than just those. Even if you have to pay for a rental car for a few more days, that would be better if it's going to save money by giving you more time to shop for the right vehicle.

I've purchased two of my previous vehicles as former rental cars. Those are usually in awesome condition. Do you have a Hertz car sales or something similar in your area?

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