I'm thinking about getting an unsecured personal loan to pay off my secured car loan so I don't have to pay for full coverage insurance.
Currently, the car's head gasket is blown and it costs $5,000 to fix it (money I don't have).
- I owe about $8,000 on the auto loan.
- The interest rate is 7.49%.
- My monthly installments on the auto loan is $209.
- My insurance payments are $319 a month.
And by the way: With the head gasket blown, my car is probably worth about $2000 if I sell it private party.
I have tried to negotiate the terms and conditions of the insurance requirements with the current lien holder of my vehicle (my credit union).
I asked them very kindly if I could change my car insurance policy to "Liability Only" so my insurance is cheaper.
They told me no.
And they wouldn't budge.
So I have an idea to apply for a personal loan of $8000 to pay off the auto loan in order to become the "Primary Lienholder" myself.
I understand that unsecured personal loans have higher interest rates because they are not backed by any collateral.
However, my credit score is about 711 (Good) and I hope to get approved on a 5 year personal loan for $8000 with around 12.99% APR with monthly payments of $182 to pay off my auto loan immediately and sell my car to a mechanic or something.
1. Is this a good idea?
2. Do you think I can get approved for something like this?
3. What other fees can I expect from a lender?
4. When I apply for a personal loan, should I tell them that it's to pay off another car loan? Or should I say that it's for something else?
5. Will I get in trouble with my credit union for pulling something like this?
Thank you for taking the time for reading this.
I hope someone gets back to me soon!
Please sign in to leave a comment.