Now that my wife and I have two car loans, we pretty much have nothing left over to put in savings. Sometime next year we want to buy our own home, but I would like to have some money saved up. Is it better to continue to pay on the car and have no money saved? Or surrender the car, save some money, and take the hit on my credit?
Unfortunately surrendering the car will damage your credit. Your interest rate will increase which will result in hundreds, if not thousands, of dollars in extra interest. More importantly, it may give the impression that you are less than credit worthy. I’d suggest saving as much money as possible without turning in the car. If possible, refinance the car for a lower rate which will result in a lower payment. Also, contact the Housing/Community Economic Development Department of your local city or county government. They may offer downpayment assistance for first-time homebuyers. Good Luck!
I would suggest that you contact a housing counselor immediately to go over your credit report and discuss your current situation. You can find a housing counselor by going to the National Foundation of Credit Counseling’s website at www.nfcc.org and they will direct you to a local non-profit in your area. There may be specific home buyer grants that you could qualify for that could reduce your down payment obligation for a new home. A housing counselor can direct you to these programs.
Certified Credit Counselor
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