How to Get Out of a Car Loan With Negative Equity

If you’re struggling with a car loan with negative equity, you’re not alone. Here’s how to get out of a car loan with negative equity and start fresh.

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Assess Your Situation

If you’re currently struggling with making payments on a car loan that has negative equity, you’re not alone. Many people find themselves in this position after an accident, divorce, or job loss. The good news is, there are ways to get out of a car loan with negative equity. The first step is to assess your situation.

Determine if You Have Negative Equity

If you owe more on your car loan than your car is worth, you have negative equity in your vehicle. Negative equity happens when you finance a car for more than it’s worth, and it can happen for a variety of reasons:

-Making a small down payment
-Rolling over negative equity from a previous loan
-Choosing a long loan term

If any of these apply to you, it’s possible that you have negative equity in your car. To find out for sure, simply subtract the value of your car from the amount you still owe on your loan. If the number is positive, you have positive equity; if it’s negative, you have negative equity.

Understand How You Got Into This Situation

If you’re reading this, it’s likely you’re upside down on your car loan, meaning you owe more money to the bank or dealership than your car is currently worth. Maybe you took out a loan when your credit wasn’t great and the interest rate was high, or perhaps you put very little money down when you bought the car and it quickly depreciated in value. Maybe you simply overestimated your income and budgeted incorrectly for a new car payment.

Whatever the case may be, it’s important to understand how you got into this situation so that you can avoid making the same mistake again in the future. Once you have a handle on your finances and know what kind of monthly payment you can afford, it will be easier to stay out of negative equity territory.

Talk to Your Lender

If you’re struggling to make your car loan payments each month and your car is worth less than what you owe, you may have negative equity in your car. This means that you’ll need to pay more to get out of your loan than the car is actually worth. In this situation, you have a few options. You can talk to your lender and try to negotiate a new loan, you can sell your car and use the money to pay off the loan, or you can continue making your payments until the loan is paid off.

Explain Your Situation

If you find yourself in a situation where you can no longer afford your car loan, it’s important to reach out to your lender as soon as possible. They may be able to work with you to find a solution that works for both parties.

Be prepared to explain your financial situation and why you can no longer make the payments. You should also have a plan for how you will repay the loan if you are granted a deferment or modification.

If your lender is not willing to work with you, you may need to consider other options, such as selling the car or surrendering it to the lender.

See If You Can Refinance

If your car is worth less than you owe on it, you have negative equity. Before you start shopping for a new car, you’ll want to get out of your current loan so you’re not paying for two cars at once.

There are a few ways to do this, but the best way is to refinance your loan with a new lender. This will give you a lower interest rate and lower monthly payments, which can help you pay off your loan sooner.

You can also try to trade in your car for a new one. This will usually only work if the new car is worth more than your current car. You can also sell your car outright and use the money to pay off your loan.

If you’re having trouble making your monthly payments, talk to your lender about modifying your loan. This could involve extending the term of your loan or changing the interest rate.

Whatever you do, don’t just stop making payments! That will only make things worse and could lead to repossession of your vehicle.

Consider Trading In Your Car

If you’re trying to get out of a car loan with negative equity, one option you may have is to trade in your car. This process can be a bit complicated, but it may be worth it if it helps you get rid of your loan. Let’s take a closer look at how this works.

Determine the Trade-In Value of Your Car

If you owe more on your car loan than your car is worth, you have negative equity in your vehicle. You may also hear this called being “upside down” or “underwater” on your loan. It’s an uncomfortable position to be in, but you’re not stuck with that car forever. You have a few options for getting out of a negative equity car loan.

The first step is understanding your options. Then, you can start working toward escaping your negative equity car loan.

Option 1: Keep the Car and Pay Off the Loan
This option is only possible if you can afford the monthly payments and if you don’t mind being upside down on your loan. If you have good credit, you may be able to refinance at a lower interest rate, which will save you money in the long run. Or, you could sell the car and use the proceeds to pay off the loan. Just make sure you sell it for more than you owe.

Option 2: Trade In the Car for a Less Expensive One
If you’re ready for a new car but are still upside down on your old loan, trading in your car is an option. You would add the amount of your negative equity to the price of your new car and finance that total amount. So if you’re looking at a $15,000 new car and owe $18,000 on your current loan, you would finance $33,000. Obviously, this isn’t ideal since it means starting anew with another loan and making higher monthly payments. But it may be necessary if you can’t afford option number three.

Option 3: Pay Off the Difference With Cash
If possible, pay off the difference between what you owe on your current loan and what your trade-in is worth with cash from savings or by taking out a personal loan from a bank or credit union. Then, use the extra money to buy a less expensive used vehicle outright or finance a new vehicle with no negative equity

See If the Trade-In Value Covers the Remaining Loan Balance

The first option to get out of a car loan with negative equity is to see if the trade-in value covers the remaining loan balance. This is only an option if you’re planning on purchasing a new vehicle and trading in the old one.

If the trade-in value is more than the outstanding loan balance, then you can use that equity to purchase a new vehicle. This will allow you to get out of your current loan and into a new one without having to come up with any extra money.

If the trade-in value is less than the outstanding loan balance, then you’ll need to either find a way to make up the difference or look at other options for getting out of your car loan.

Sell the Car Yourself

One option to get out of a car loan with negative equity is to sell the car yourself. You can do this by finding a private buyer or listing the car for sale on a classifieds website. If you sell the car yourself, you will need to pay off the loan and may not end up with much money left over.

Determine the Private Sale Value of Your Car

The first step is to find out what your car is worth as a private sale. You can do this by checking the Kelley Blue Book value or searching for similar cars for sale in your area. Be sure to include any extra features or add-ons in your calculations. If you have negative equity in your car, this number will be lower than what you still owe on your loan.

See If the Private Sale Value Covers the Remaining Loan Balance

The first step is finding out the private sale value of your car. This can be done by going to Redbook or Glasses Guide online and searching for your car make, model and year. Once you have theprivate sale value, compare this to how much you owe on the car loan. If theprivate sale value is more than what you owe then you can sell the car and pay out the loan.

Let the Car Be Repossessed

You can get out of a car loan with negative equity by simply allowing the car to be repossessed. This will, of course, damage your credit score, but it will get you out of the loan. You will no longer be responsible for making payments on the car, and you will be able to get a new car loan in the future.

Understand the Consequences of Repossession

Most people know that repossession is bad. But what they don’t realize is just how bad it can be. If your car is repossessed, it will damage your credit score, which will make it harder for you to get a loan in the future. And if the car is sold at auction for less than what you owe, you’ll still be responsible for paying the difference.

Before you decide to let your car be repossessed, make sure you understand the consequences. Once you’ve made an informed decision, you can take steps to minimize the damage to your credit score and finances.

Work With the Lender to Minimize the Impact

If you’re facing financial difficulties and can no longer afford your car payments, you may be wondering if it’s better to let the car be repossessed.

While it’s not an ideal situation, there are some things you can do to minimize the impact of a repossession on your credit. First, it’s important to contact your lender as soon as you realize you’re having trouble making payments. They may be willing to work with you to restructure your loan or defer payments for a period of time.

If you do decide to let the car be repossessed, there are a few things you can do to limit the damage to your credit score. First, try to negotiate with the lender to have the debt forgiven. This is often easier said than done, but if you can get them to agree, it will save you from having the negative mark of a repossession on your credit report.

Another option is to try to sell the car yourself before it’s repossessed. This will allow you to pay off the loan and avoid the negative mark on your credit report.

Ultimately, whether or not you should let the car be repossessed is a personal decision that depends on your individual circumstances. If you’re struggling to make payments, it’s important to contact your lender and explore all of your options before making a decision.