What To Do When Upside Down On Car Loan

Used cars depreciate at a much slower rate than new cars a new car drops 10 in value the minute you drive it off the lot.

Refinancing your car loan is an option that allows you to take out a new loan to pay for your current one. A few years later it might only be worth 15 000. Maybe you don t really know where you currently stand with your car loan. Don t give up on financing.

Loans go upside down when the item you buy loses value faster than the loan balance decreases. A longer loan will help keep monthly payments low but chances are it will lead to being upside down when the time comes to trade in for. Taking out another loan may help you get out of an upside down car loan. How loans get upside down.

If you owe more than 15 000 on the loan you have an upside down loan. Paying extra will help you get out of the loan faster and may allow you to bring down the balance at a rate that outpaces your car s devaluation. Also known as being upside down this common scenario is a disadvantage of accepting a car loan. When the balance of your auto loan is greater than the value of your car this is commonly referred to as being upside down or underwater on your loan.

RELATED ARTICLE :

• what do 18 year olds want for christmas
• what did the ocean say to the shore
• what do 13 year olds want for christmas

The end result is you owing the bank more than what you originally purchased the car for. Find out your auto loan balance. For example a brand new car might cost 25 000. Take out another loan yes you read that right you can refinance a car loan that is upside down.

Opt for a lease instead. While you ll still have to cover your negative equity keeping your vehicle and paying off your loan can help you make the best of a bad situation. Match your loan to your expected ownership length of time. Let s say you ve got a 15 000 car loan and your car is valued at 7 000.

The best way to get out of an upside down car loan with negative equity is to simply keep the vehicle until enough payments have been made that the remaining loan amount is less than the resale or trade value of the car until some positive ownership equity has been built up. Your auto loan can also go upside down if your car suddenly depreciates in value such that if you sold it you wouldn t be able to pay off your loan. Buy a used car. To lower the total amount of money you will have to pay for your loan you can take out a loan from another insurance company that has a lower interest rate to pay off your original loan all at once.

Here are a few strategies to keep your car loan above water the next time around. That means you re 8 000 upside down.