So currently, my credit isn't in the best spot (around 520), and I have a 2008 Chevy Silverado 1500 LT that I purchased in August 2016. I currently owe around $12,000 on the truck, and the other day it started making a grinding noise. After some back and forth, turns out there was an oil leak and there is now scouring in the engine, which means the mechanic is recommending scrapping the engine and replacing it, about a $7,000 cost.
I have about 2 months before I NEED need a car/this car back, and I have about $3,500 saved up.
I think my only options are to either
A) trade it in for incredibly low (all quotes/offers have been in the $4K range at max), and take the ~$8000 hit in negative equity, and get a brand new car (most banks will only approve negative equity with a loan on a 2017/2018 vehicle), and make payments on it... however with my credit situation, my interest rate/monthly payment would be through the roof, around $650 a month. So in this scenario, I would take 2 months to pay off bills using the $3,500, and try to save as much as I could for a down payment while still working towards helping my credit score.
B) Cash out my 401K to pay for the repairs. In this scenario, it'd take about 2 months to get my check for the 401K. I have about $9,000 in there (just started 2 years ago and going slow on it), so I would need to take out the full amount to cover taxes/penalties, and then include that with the $3,500 I have saved to cover the full payment. The plus to this is that I continue making my $300/month payments, but I wipe out my 401K completely. I DID just switch jobs though, and I'm only 25, so hopefully it wouldn't hurt me too much in the long run.
Can anyone think of any other options I have, or let me know of anything I might be missing, especially in the 401K Cashout scenario? The most important thing to me right now is keeping my monthly costs low, as I need to continue paying student loans, so a +$350/month would hurt me a lot more than losing $7,000 up front, but I'm terrible with personal finance, so I might be overlooking something.
Submitted November 03, 2017 at 02:42PM by HobbsBear http://ift.tt/2zbUtQA
