UPSIDE DOWN on a LOAN?
Have you ever felt like you was just stuck with your car? When you go to a car dealer, do they deny you of a trade-in? That means you are UPSIDE- DOWN on your car loan.
What does UPSIDE DOWN car loan mean?
If you owe more on your car than the car is actually worth, you are upside-down in your auto loan. This means you have negative equity.
This is not a good position to be in. If you decide to sell it, the sale price won’t cover your auto loan. Likewise, if you get into an accident, your insurance will only pay for the value of the car not the total cost of the loan. This leaves you with a payment for the remainder of the loan.
How Did I get UPSIDE DOWN?
- Roll Over Loan. If you owe money on your old car the dealer will offer to roll over the negative equity amount into your new car loan. Just to make a sale!
- Getting all the Extra Options. Don’t get talked into pricey unnecessary options like DVD players, sunroofs, leather upholstery, back up cameras, etc. Stay on budget.
- NO MONEY DOWN SALES. These incentives are great but they end up hurting at the end. You get stuck with long loan terms. Cars depreciate 20% immediately after purchase and by the 3rd year the car loses 50% of its value. You should at least put 20% down if you can.
Here are 4 Tips to Get Out of an Upside Down Car Loan
- Keep your car. Continue paying until you own it or until your loan amount catches up to the actual value of the car.
- Refinance your existing car with a short-term loan. Third part financial companies offer refinancing loans that could speed up the time it takes to get your loan healthy.
- Sell it privately. If you’re intent on getting rid of the car, and it’s in good condition, sell it privately rather than trading it in at a dealership. Private sales of cars produce higher return than trade-ins.
- Transfer the balance to a credit card. Transfer your car loan to a credit card with a 0% introductory offer. At the end of the introductory period (12-15 months) refinance the remaining balance at a credit union or peer to peer lender.