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Dear Penny: I bought a new car at 17 percent interest. How can I lower my payment?

Unfortunately, there are not any painless answers, the advice columnist says.
[Getty Images] [Getty Images]

Dear Penny,

I purchased a Kia Soul brand new in 2018. I feel very stuck because my credit wasn’t the best at the time. Now, my car payment is so high. It’s $450 a month due to my 17-plus percent interest rate.

I’ve even tried to trade it in, but now I really can’t because my credit score is too low. Do you have any ideas?

-Stuck at 17%

Dear Stuck,

You probably don’t have any great options right now because you very likely have negative equity in your car. That means you owe more on it than it’s worth.

It’s pretty normal to start out with some negative equity when you buy a new car if you don’t make much of a down payment. You know that line about how a new car loses 20 percent of its value the moment you drive it off the lot? Well, actually, that 20 percent drop happens more in the first 12 months you have the car, but you get the picture: New cars lose value fast.

Normally, the negative equity situation is short-lived because you’re able to start chipping away at the principal balance. But you’re paying 17 percent interest. You don’t need me to tell you this, but that’s really, really high. High interest rates mean you spend a lot more time being underwater in a loan, and as long as you’re underwater, your options for getting out of this car loan will go from bad to worse.

It’s unlikely that you’d be able to refinance, especially with poor credit. And your downsizing options at the dealership would likely roll your existing balance into a car loan. That may or may not reduce your payments, but it would push you deeper into debt and prolong the pain.

You’re not going to like the advice I’m about to give you, but hear me out: Your best solution is to make that oh-so-painful $450 monthly payment and then pay even more on top of that.

You have a relatively new vehicle. Could you use that Soul to make an extra $50 or $75 a week with a side hustle, like driving for a ride-share app or delivering groceries, and put every dollar you make toward that loan?

If you’ve had your car for around two years, chances are high that at least half of your payments are still going toward interest. Putting an extra $200 or $300 a month into your car payments for the next six months or so could do a lot more than just help you reduce the loan balance. It could help you flip this loan from upside-down to right-side up, which will buy you better options.

All this is assuming, of course, that you are able to make your payments and haven’t fallen behind. However, if you can’t make the payments, it’s essential that you talk to your lender as soon as you know you can’t afford them.

Some lenders have hardship programs that will let you miss a payment or two because they’d prefer not to repossess your car. Or if you know you won’t be able to afford them in the long term, you may need to work out a voluntary surrender.

But as long as you’re not at risk of defaulting, the best-case scenario is for you to build equity as quickly as possible until you can sell the car for the loan balance and have money left over to make a decent down payment on an older used car. When that time comes, you’ll probably get a better price by selling it yourself, rather than going through a dealer.

Refinancing probably isn’t going to be a good option for you — unless you’ve neglected to mention that you have a willing and creditworthy potential co-signer. I’m also going to assume that you’ve shopped for lower rates with online lenders and haven’t found a better offer.

But I don’t think refinancing is the best option for a couple of reasons: One, you save less money the longer you wait because the amount you pay in interest gets smaller throughout the life of the loan. More importantly, though, is that this sounds like a situation where your interest rate is only part of the problem. It sounds like you bought too much car. That’s a problem only downsizing can fix.

Whatever you do, please do not consider any option that would increase the length of your loan, even if it would reduce your monthly payment.

This is a situation where you’ll gain from short-term pain. Getting out of this loan as fast as you can is the healthiest money move you can make.

Robin Hartill is a senior editor at The Penny Hoarder and the voice behind Dear Penny. Send your tricky money questions to