I'm in the process of a divorce, and my Spouse is cosigner on my car loan. The car is a 2004 Chrysler Pacifica with about 40k miles on it, and it's financed through Wells Fargo Financial at a crappy interest rate. I'd like to either refinance the car to get Spouse's name off the loan, or trade it in for a different car (financed only in my name). Ideally I would also like to get a lower payment, because the high interest on this one is killing me.

When I originally financed the car, my FICO was about 598. It's improving, but is still only around 638. I have decent verifiable income and I've been at my job almost 5 years, but my credit cards are at about 80% utilization. On paper, I'm still a homeowner, although that will change in about 6 months.

The main problem is that I'm way underwater on this loan, due to several factors. KBB value for a trade-in is just under $15k, and I owe about $29k on it. I've done some research on auto refinancing and I think my car has too many miles on it to be eligible. If I trade it in, are any lenders likely to finance that much negative equity, given my so-so FICO?

I will admit that I've considered a voluntary repo on this vehicle, just to get out from under it. I know it would impact my Spouse's credit rating (in addition to my own), but he's just declared bankruptcy so it can't really get any worse than it already is...can it?

Another factor is that I got one of those Capital One Auto Finance pre-approved letters. I called to get the approved amount, and the automated system told me it is "Up to $30,225." Their use of the qualifier "up to" seems questionable. I did buy a car about 5 years ago with C1AF through a similar process, but they had given me a firm approval amount. Thoughts?

By your own post I read that you are approximately about 15,000.00 upside down.

You wouldn't want to see the payment that would generate even if someone could find the car or the deal to make it work as far as carrying the negative equity forward.

If there actually is 15,000.00 of negative equity, I don't believe there would be lenders who would refi at all.

I do have a few specialty niche lenders who go for those astronomical overadvances, but your last name needs to be "Rockerfeller" to qualify so to speak.

And a repo will have disastrous consequences for your future credit situation, so please do not do that.

PS: welcome to creditboards. Sorry to be so negative with your first post.

No problem, I don't take it personally - thanks for your quick response!

My name is definitely not Rockefeller, I suspected that financing a new car with an added $15k of negative equity would equal astronomical payments. It just seems that there has to be some sort of solution that would get my Spouse off the loan and perhaps improve on the !@#$%^& 14.9% Wells Fargo interest rate.

I have done one voluntary repo in the distant past, and while it did hurt my credit somewhat for about 5 years, it wasn't catastrophic. FWIW, I just called Wells Fargo and learned that my account is in "bankruptcy status" due to my ex's bankruptcy, and will remain so until it's paid in full. They told me it means I'm probably solely responsible for the loan now, so maybe my whole point is moot. They wouldn't give me any definite info "due to privacy laws" - any idea what that means in terms of my credit?

While perhaps better addressed in the credit or bankruptcy forum, the bankruptcy probably discharges one's responsibility to pay a debt. In other words, you probably are solely responsible to pay the debt. The major credit issue is the posssibility that WFF will report the loan as IIB even though you are making the payments.

I would agree with MarvBear that a voluntary repo is not a good course of action. You should consider yourself fortunate that a voluntary repo was "not catastrophic to your credit". It tends to be difficult to get auto loans for a year after a repo and even after the repo is over a year old the loan terms are likely to be quite unfavorable.

It is also possible after a voluntary repo that WFF will sue you for the deficiency balance.

Thanks for the feedback. What's IIB?

IIB means included in bankuptcy.

Thanks, I'll keep an eye out for that.

It looks like my best option is to bide my time. By the time this car is paid off my credit should be a lot better, and I'll have access to much lower interest rates. Thanks to all for your help!

I may be wrong, but I think the comment line regarding that trade-line should read Account included in bankruptcy of another.

It probably should be reported as "included in bankruptcy of another" but there is a distinct possiblity the account will simply be reported as IIB. One needs to check the reporting as you can be unjustly penalized for inaccurate reporting. You could be making all the payments on time but still have it inaccurately reported.

The OP will need to monitor his CR.

OMG 15000 in the soup!!! I havent seen that in a long time. About the only thing going to help you there is CASH

Also, FWIW if you don't have GAP insurance, I would go get myself a GAP policy sooner than later.

Sorry to hear about your situation. With that much negative equity you might be stuck for awhile. If you had maybe half that much you could probably get out of it with a combination of a little cash and some rebate money, but $15K is a lot. I had $9K worth of NE once but was able to put together $7K in cash and rolled the remaining $2K into a new loan, so it worked out okay.

Your interest rate is pretty high, but I've seen higher ones so that's one thing to be positive about. I guess for now I would just keep making the payments which will build a good history and try to knock down some of the balances on your credit cards if possible. This will also increase your FICO scores. Then hopefully you'll be able to refinance the car at a better rate down the road.

And I definitely second what Marv recommended about GAP insurance. If your car gets stolen or totalled and you don't have GAP, you'll be on the hook for all of that negative equity and that's the last thing you need right now.

Well, hang in there. Ten years ago I was right where you are now (Chapter 7 BK, high balances on CC's, 15% car loans) but today I have FICO scores over 750, a 2.9% car loan, and two pre-approved car loans if I want to buy again. So, it's definitely doable...you just have to be patient. Good things come to those who wait. I know it sounds stupid, but it's really true sometimes.

Good luck and keep up the fight!

OK I'm dumb...I keep reading about GAP insurance but have no clue as to what it is or how it works. Can you elaborate????? Please!!!!

GAP insurance covers the difference between your loan payoff amount and the vehicle's actual cash value if the car is ever declared totaled. If the OP wrecked the Pacifica, the insurance company would only pay the $14k actual value of the van. The OP would still owe the finance company the $15k "upside down" amount to satisfy the loan. If they have GAP insurance, it would pay the $15k difference.

A GAP insurance policy will have SOME limitations and exclusions.

Research this carefully so you have the most protection possible for the money that you spend.