To redeem, or reaffirm, or surrender, or simply retain? THAT is the QUESTION...

[quest42]

Here is an odd scenario:

I bought a used 1998 truck in 2001 for $10,000.

My truck is insured... If it gets totalled, the insurance pays book value -- I think... about $3,500 -- as of today.

But, my 4-year vehicle loan (rule of 78 - bummer!) has another year left to pay off... a balance now of about $4,000.

So, I think I could "redeem" the truck by paying $3,500 - the book value, right??? (IF I had that money laying around... my homestead/wildcard exemption is $18,675 - California system 2... my total assets are less than $10,000...)

IF I could redeem, then it seems the lender loses $500? Right??? Essentially, the future interest I would be paying in the next year...

However, IF the car was totalled today, the insurance would pay the lender (lien-holder) $3,500 -- and then I would have to make up for the loan balance with another $500... yes?

Any comments?

Should I try to scrape up that $3,500 to redeem??? IF so -- how, exactly, does redemption work?