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SMART MONEY: Negotiation may turn car loan into a win-win

by on January 22, 2017 12:49 AM

DEAR BRUCE: My mother passed away a few weeks ago. She has a car loan with a credit union in the amount of $20,000 on a 2010 vehicle. I can’t afford to continue making the car payments, even though I can really use the vehicle. What do I need to do in order to give the car back to the bank? — Jeanie

DEAR JEANIE: First of all, you say you own a 2010 vehicle with a $20,000 note. It sounds to me that the bank has a problem because there is no way in the world a seven-year-old car would be worth $20,000 or even close to it!

I would go down to the bank and say something like this: “We have a problem, which we may be able to solve. I am the executor of my mother’s estate, and I have to settle her affairs. Since her estate was almost cash-free, there is no chance of you getting paid.

“Given that, let’s come down to what the vehicle may be worth. If you’re willing to finance that amount for me, I will benefit from getting a car and you’ll benefit by getting rid of a potentially bad loan.”

If the bank is not amenable to that negotiation, just have your attorney write it a letter saying there is no money to pay for this loan and you are relinquishing the vehicle. I think you’ll find that most banks will recognize they’re in a bad situation they can’t correct and will end up negotiating with you.

DEAR BRUCE: I would like to give my son power of attorney because I am getting up in age. Does this mean I can’t make money decisions for myself anymore? — Paul

DEAR PAUL: The idea of giving an individual limited power of attorney, conditioned on your physician recommending such an activity, doesn’t take away any of your financial decision-making. But with a limited power, under certain circumstances, your son can do routine bookkeeping and so forth.

I would not give an unlimited power of attorney at this point in your life because there is no reason for it. In the event that you have a turn for the worse, then the limited power of attorney can kick in and your son can handle your affairs.



Send questions to bruce@brucewilliams.com. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided. The Bruce Williams Radio Show can now be heard 24/7 via iTunes and at www.taeradio.com. It is also available at www.brucewilliams.com.
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