Personal Finance

I'm mid-40s and was making $100k a year until I lost my job - what should I do with the $25k in car loans I have?

Christy Bieber

Published: February 24, 2025 11:04 am

A Reddit user with a $100K income said she and her husband were well on their way to becoming “financially fit,” until a job loss left them without the income they needed to keep making progress.

Sadly, the couple ended up in debt and is now stuck paying back a $25,000 car loan.  She’s wondering what she should do to get out of the hole, including whether to sell her house at a profit to repay what she owes.

So, what’s the best route for her to fix her finances and get back on track?

How to deal with a $25K car loan after a job loss?

A job loss can derail anyone’s finances, but the best way to make sure you don’t get into debt is to have an emergency fund to cover your bills. Unfortunately, it’s too late for the Reddit user to do that so now she has to try to find her way out of the debt that she’s in.

She did indicate that a new job has come along so paychecks are coming into the house again. Now, the key here is to figure out the best plan to get out of the debt — and the right way to do that will depend on her situation. She’s thinking about selling her house for a profit, using the proceeds to pay off the loan, and buying a new cheaper place so she’d be debt-free except for the mortgage.

While this may be a good idea in theory, the sad reality is that mortgage rates are very high right now. Unless she can pay for her new house in cash — which it seems like she can’t — then she may not be able to actually reduce her costs very much if she downsizes. In fact, buying a cheaper home at a higher rate could leave her with payments that are the same or higher than on her current loan.

Unless she does the math and really could save a lot of money each month with the home switch, her better option may be to get rid of the car and get a cheaper one. A $25K car loan is a good amount of money to owe, and paying a big loan on a fancy vehicle often doesn’t make financial sense because cars go down in value over time. If she could sell the car for enough to pay off the loan and could buy a cheap used car for a much smaller sum, then she may be better off.

Alternatively, she can focus on paying off the debt as fast as she can by making extra payments and sacrificing on other things. If she gets serious about debt payoff and severely limits spending on dining out, entertainment, and other non-essentials for a while, she could hopefully eliminate her loan balances pretty quickly.

A financial advisor could provide helpful advice

When overcoming a financial setback like this, often the best thing to do is to get professional advice. If the Redditor can talk with a financial advisor, the advisor can provide advice on whether selling the home makes sense, whether it’s a good idea to pay off the car loan early or to get rid of the car, and what other options the poster has to get back on firmer financial footing after a job loss sent her off course.

With the right advice, hopefully, the Redditor can find a way to be proactive, fix her financial situation, and save up an emergency fund so any future job losses won’t lead to this type of trouble.