I have a friend who is experiencing a lot of difficulties. Some of them are financial.
She is out of work and is low on money. She found out about a Covid-related program that would let her stop making car payments for 2020. The payments are now resuming in January.
She apparently misunderstood how the program worked. She thought all of the payments were being moved back ten months. But the program only deferred these payments until the first month of 2021. The result is that she is now supposed to make ten months of payments in January.
She does not have the money. In fact, she did not have the money for just the one month payment she expected and had been asking people to help out by donating money to her. She is now asking people to donate money to her for the much larger payment, which is ten times what she thought it would be.
I am not in a position to give my friend the money to make this large payment. (I am also not in a position to loan her the money although I expect such a loan would end up being a gift.) I could help by contributing some money to the general donation fund.
But here’s the thing. I feel that she is not going to be able to get the whole amount she needs. And I have now had a cynical thought; if she can’t pay all the money she owes, is there any point in paying part of it? If we give her money and she pays off half of what she owes and they repossess her car anyway for the unpaid other half, what’s the point in paying anything? She might as well pay them nothing.
I feel guilty for questioning whether I should be helping a friend in need. I feel I should give her the help I can because she’s my friend. But I also feel like I shouldn’t be giving away money when it ultimately won’t do anything to help her situation; that’s just me throwing money away.
Ugh, horrible situation. If possible, would she be able to refinance the entire loan at another bank or credit union? That would essentially be resetting the clock, original creditor gets paid off in full, and she starts with with single payments per month (of course, it’s likely to be a bit more than her current payments, but that’s life). Only issue might be that the depreciation of the car over the last 10 months may make the loan to value a bit higher than a bank may want to deal with (I hope she’s not underwater on it). If so, she may need to throw an additional chunk of money at it, but it still might work out for her, or at least be a bit better than what the current lender is wanting.
My personal way to think about this would be to decouple the question from the car. How much money (or whatever) would you give to her in other situations. Just makes you think about your connection to them and why you’re giving them something.
This is the affordable used car. I feel my friend may have reached the point where she cannot afford to own a car.
But without a car, she is going to have a nearly impossible time making her situation better. Even with a car, she is going to have a really difficult time doing so.
I want to help her but I feel the help I can give her is not enough to make things better for her. And then I go back to my cynical mode and ask myself what the point is of making my life worse when it doesn’t make her life any better?
Look, you have helped her in the past. Unless you have led her to believe that you would always help her, it’s ok to pass now. Times are hard now. For her. For you. For everyone. It’s ok for you not to help and let the chips fall where they may. She’ll end up ok.
Now, if her collection efforts are successful but she’s thirty cents short, then yeah, you kick in. But otherwise it’s fine not to help.
I agree with the other posters and the OP’s initial thoughts - no point in giving money that won’t help. It could be more helpful to offer advice on how to make the best of a bad situation.
I’m sure OP has thought of this, but I don’t suppose you have a car you could lend them - even if just to get to job interviews? Or even take them places yourself as a favour? Then you could tell your friend something like money is tight for you right now, but if they lose the car, you don’t mind giving them free rides when you can.
I’m also confused about the arrangement entered into by the friend. Why the hell would the creditor think that if someone is unable to pay one month now, they will be able to pay 10 months’ worth 10 months later? Were they hoping for a lottery win or something? In the UK, payment holidays for loans and mortgages were offered, but my understanding of how they worked was like the OP’s friend’s - you would end up paying more in the long run because interest would keep rolling up over a longer period, but you weren’t expected to make all the missed payments at once. That’s just ridiculous - in other words, I can’t really blame the OP’s friend for their initial misunderstanding.
Final thought - are there any free debt advice services/charities in your area that could help?
Here’s another thought absolutely no one has brought up:
Who owns the note on the car?
If I was in her position in addition to trying to raise the money I need I’d go to the owner of the loan and say “Hey, I can’t give you all of it but I can give you X towards the amount, and pay Y going forward. Can we work something out?”
The worst they can say is “no” in which case she is no worse off than before.
But if they say yes then the money will do some good and she might be able to keep the the car. Has this option been pursued?
This is true. The bank, or lending institution of whatever stripe, may be willing to renegotiate, if she can pay anything. This is especially true if she was always current before COVID, which is important information to have-- do you know what her credit was like in February? Someone who had a credit rating of 780 right before the pandemic hit, and then had had it fall into the toilet in June, is a lot better risk than someone whose credit was never good.
Also, how much are the payments, and what other money has she put together? If she has anything upwards of $2000, then she has enough to by a crappy car that will get her around town, so she can look for a job, and get to the job. The best if that’s only half of what she owes, then the best advice is to let the car get repossessed.
But if she has nowhere near enough to buy something drivable, then she’s really screwed. She might as well stop paying rent in order to make the payments, and live in the car.
When is the payment due? Is there time for a GoFundMe campaign?
I’m sure OP has thought of this, but I don’t suppose you have a car you could lend them - even if just to get to job interviews? Or even take them places yourself as a favour? Then you could tell your friend something like money is tight for you right now, but if they lose the car, you don’t mind giving them free rides when you can.<
No, I don’t have a car she can use. I can give her occasional rides somewhere but I would not be able to drive her back and forth to a job every day.
I’m also confused about the arrangement entered into by the friend. Why the hell would the creditor think that if someone is unable to pay one month now, they will be able to pay 10 months’ worth 10 months later? <
I don’t know the details. I assume the company felt that offering a ten month delay was they were willing to do. Being as they weren’t obligated to do that, I can’t fault them for not doing more.
I haven’t discussed the terms of this arrangement directly with my friend. Being as I am not planning on getting involved, it’s none of my business.
She is already working with these. While I have discussed the car situation here, there are other issues going on as well.
My advice would be for her to talk to the credit/collections department for the loan. Explain her situation and try to come to a payment arrangement. Odds are, there’ll be a lot of people that are in the same situation. They’d rather have some money coming in than have a bunch of repo’d cars.
But she still needs to have money coming in. She has to find work. If she can’t manage regular car payments, she can’t afford to keep the car. Is she paying her car insurance, I hope?