- Assess Your Situation
- Decide If You Should Keep or Get Rid of the Car
- Try to Negotiate With Your Lender
- Refinance Your Loan
- Sell the Car
If you’re stuck in a negative equity car loan, you’re not alone. Here’s how to get out of it and move on with your life.
Checkout this video:
Assess Your Situation
You may find yourself in a difficult financial position if you’re upside down on your car loan, meaning you owe more than the car is currently worth. This can happen for a number of reasons, including an increase in the interest rate on your loan, a decrease in the value of your car, or simply because you made a large down payment. Whatever the reason, being upside down on your loan can make it difficult to sell or trade in your car, and you may feel like you’re stuck.
Determine how much you owe on the car loan
The first step is to find out exactly how much money you owe on your car loan. This information should be listed on your monthly car loan statement. If you don’t have a recent statement, you can contact your lender directly to get the information. Knowing exactly how much you owe is important because it will help you determine your options for getting out of the negative equity situation.
Once you know how much you owe, the next step is to research the current value of your vehicle. You can do this by checking online listings for similar vehicles in your area, or by visiting a local dealership and asking for a trade-in value estimate. It’s important to be realistic about the value of your vehicle, as this will play a big role in determining which option is best for getting out of negative equity.
Determine the value of your car
The first step is to find out the value of your car. You can do this by searching for your car’s make, model, and year on Kelley Blue Book or Edmunds. These websites will give you an estimated value for your car based on its condition.
If you owe more money on your loan than your car is currently worth, you have negative equity in your car. For example, let’s say you have a five-year loan on a car that is currently worth $15,000. If you still owe $17,000 on the loan, you have $2,000 in negative equity.
Decide If You Should Keep or Get Rid of the Car
If you owe more on your car loan than your car is worth, you have negative equity in your car. You may be upside down on your car loan, or you may be underwater on your loan. Many people are in this situation because they financed their car loan for too long or they bought a car that depreciated too quickly.
Consider the monthly payments you can afford
If you’re dealing with a negative equity car loan, you may be wondering if it’s worth it to keep the car or get rid of it and start fresh with a new vehicle. Here are a few things to consider as you make your decision.
First, take a look at your budget and see how much you can afford in monthly payments. If you can swing it, keeping the car may be the best option since it will allow you to build equity more quickly. However, if your budget is tight and making the payments is a struggle, getting rid of the car may be the better choice.
Next, think about how long you plan on keeping the car. If you only plan on owning it for a few years, it may not make sense to keep it and pay off the negative equity. But if you plan on driving it for a long time, building equity may be worth it in the end.
Finally, consider your personal preference. If you’re tired of driving the same car and want to upgrade to something new, getting rid of your current car is probably the best option. However, if you love your car and don’t mind making extra payments to build equity, keeping it may be the way to go.
Consider the long-term costs of keeping the car
If you’re upside down on your car loan, you have two basic options: sell the car and pay off the loan, or keep the car and continue making payments. But which is the better option?
It depends on a few factors, including how much you owe, how long you plan to keep the car, and what kind of interest rate you’re paying. Here’s a closer look at each option to help you decide what’s best for you.
Selling the car:
If you sell the car and pay off the loan, you’ll be out of debt but you’ll also be without a car. If you need a vehicle, you’ll have to buy another one, which could put you right back in the same situation (owing more on your new loan than your car is worth).
You may be able to sell the car for enough to pay off the loan, but it’s also possible that you’ll end up owing money after the sale. This is especially true if you bought the car brand new and it has depreciated significantly in value.
Keeping the car:
If you keep the car and continue making payments, eventually you will pay off the loan and own the vehicle outright. In the meantime, however, you’ll be stuck making payments on a depreciated asset. And if your interest rate is high, it could take a long time to reach positive equity (the point where your loan balance is less than your car’s value).
Before making a decision, calculate how much interest you’ll pay over the life of your loan if you keep it. Then compare that number to what it would cost to buy another vehicle outright (assuming there’s no trade-in value for your current vehicle). This will helpyou determine whether it makes more financial sense to sell or keep your current ride.
Try to Negotiate With Your Lender
If you find yourself in a situation where you owe more on your car loan than your car is worth, you have negative equity in your car. This can happen if you’ve only made a few payments on your loan, or if the value of your car has decreased rapidly.If you’re struggling to make your payments or you’re facing financial hardship, you might be wondering how to get out of a negative equity car loan. The first step is to talk to your lender.
Explain your financial situation to your lender
The first step is to have an honest conversation with your lender. You’ll need to explain your financial situation and why you can’t make your payments. Be prepared to provide documentation that supports your case. This could include pay stubs, bank statements, and tax returns. Your lender may be willing to work with you if they believe you’re truly struggling.
There are a few options that your lender may be willing to consider. One is called a repayment plan. With this option, you’ll agree to make larger payments until you bring your loan balance up-to-date. Another possibility is called forbearance. With forbearance, your lender agrees to temporarily lower or suspend your payments. This gives you some breathing room, but it’s important to understand that interest will continue to accrue during this time.
Once you and your lender have worked out an arrangement, be sure to get it in writing so there is no confusion about the terms of the agreement. And, most importantly, make sure you stick to the plan! If you fail to make the agreed-upon payments, your lender could start the foreclosure process again.
Ask for a lower interest rate
The single biggest factor in your monthly car payment is the interest rate on your loan.Interest rates can vary significantly from lender to lender, so it pays to shop around.
If you have a good credit score, you may be able to negotiate a lower interest rate with your lender. Even a small reduction in your interest rate can save you hundreds of dollars over the life of your loan.
Ask for a longer loan term
If you’re upside down on your car loan, you have two options to get back to even: pay the difference off in cash or roll it into a new loan. If you do the latter, you’ll want to negotiate for the longest loan term possible. That will lower your monthly payments and give you more time to pay off the negative equity. The downside is that you’ll be paying interest on the negative equity for a longer period of time, which will increase the total cost of the loan.
Refinance Your Loan
If you’re upside down on your car loan, meaning you owe more than the car is currently worth, you have a few options. One is to continue making payments on the loan until the car’s value increases and you build equity. Another is to refinance the loan with a new lender.
Find a lender who offers refinancing for negative equity car loans
It can be difficult to find a lender who offers refinancing for negative equity car loans, but it’s not impossible. There are a few options available for people who find themselves in this situation.
One option is to look for a “no-equity loan.” These loans are designed for people who owe more on their car than it’s worth. The interest rates on these loans are usually higher than average, but it’s possible to find a reasonable rate if you shop around.
Another option is to find a lender who is willing to work with you to refinance your loan. This can be a difficult process, but it’s worth trying if you want to lower your monthly payments or get out of your negative equity car loan.
If you’re having trouble finding a lender who offers refinancing for negative equity car loans, you can try contacting your current lender and asking if they have any programs that might help you. Many lenders are willing to work with borrowers who are struggling to make their payments, so it’s definitely worth asking.
No matter what route you choose, remember that it’s important to do your research and make sure you understand the terms of your new loan before you sign anything. Refinancing can be a great way to get out of a negative equity car loan, but it’s not always the right choice for everyone.
Apply for a new loan
If you’re stuck in a negative equity car loan, you have a few options to get out from under the debt. You can refinance the loan, get a new loan or pay off the debt in full.
Refinancing is taking out a new loan with different terms to replace your current auto loan. This could mean a lower interest rate, different monthly payment or both. Refinancing is only an option if your credit score has improved since you got the original loan. If you qualify and decide to refinance, make sure to shop around for the best deal.
Getting a new loan means taking out a new auto loan to pay off your old one. This could be an option if you can’t qualify for refinancing or don’t want to go through the hassle. If you have good credit, you may be able to get a better interest rate on the new loan than what you’re currently paying.
Paying off your debt in full is always an option, but it may not be realistic for everyone. If you can afford it, paying off the debt will save you money in interest and get rid of the monthly payment. This could free up some extra cash each month that you can use to build up your savings or pay down other debts.
Use the new loan to pay off the old loan
You can use the new loan to pay off the old loan, and you may be able to get a lower interest rate in the process. When you refinance, you may be able to choose a different repayment term. A shorter term will probably have a lower interest rate, but higher monthly payments. A longer term will have a higher interest rate, but lower monthly payments.
Sell the Car
If you’re stuck in a negative equity car loan, selling the car is one way to get out of it. This will allow you to pay off the loan and get some money back. You can then use that money as a down payment on a new car.
Determine how much you need to sell the car for to pay off the loan
The first step is finding out how much you need to sell the car for to pay off the loan. This can be done by looking at your loan documents or contacting your lender. Once you have this information, you will need to find a buyer who is willing to pay this amount for the car.
There are a few different ways to find a buyer for your car. You can try selling the car yourself, trading the car in to a dealership, or selling the car to a private party. Each option has its own set of pros and cons, so you will need to decide which is best for you.
Selling the car yourself will likely get you the most money for the car, but it will also take more time and effort on your part. Trading in the car to a dealership may be the easiest option, but you will likely get less money for the car than if you sold it yourself. Selling the car to a private party is somewhere in between these two options in terms of time and effort, and you may be able to get more money than trading it in but less than selling it yourself.
Once you have found a buyer for your car, you will need to make sure that the sale goes smoothly. This means getting all of the necessary paperwork in order and transferring ownership of the vehicle. Once this is done and the buyer has paid you, your negative equity loan will be paid off and you will be free of the debt!
List the car for sale
One way to try and offset the cost of a negative equity car loan is to list the car for sale. This will require some effort on your part to find a buyer, but if you are successful, you can use the proceeds from the sale to pay down the balance of your loan. Keep in mind that you will likely have to sell the car for less than what you owe on the loan, so this option may not be ideal if you are trying to avoid a financial loss.
Negotiate with buyers
The sale price of your car needs to be high enough to cover what you owe, plus any costs associated with selling the car. You may be able to negotiate with buyers to help make up the difference. If you’re having trouble finding a buyer, you may be able to sell your car to a dealer who specializes in buying negative equity cars.