Upside Down Car Loan

Replacing low interest rate car payments with high interest rate credit card debt is a lousy way to get out from under an upside down car loan.

Upside down car loan. Being upside down on your car loan may not pose a problem as long as you are planning on holding onto the car until you have some equity in it. For example if you have a car loan with a 20 000 balance on a car that only has a market value of 17 000 you have 3 000 negative equity. For example a brand new car might cost 25 000. You ll have to pay off the negative equity if you want to trade in a car you still owe money on.

For example say you still owe 30 000 on a car that you d like to sell or trade in but the most you ve been offered is 20 000. Using a home equity loan or home equity line of credit heloc is another risky way of getting out of an upside down car loan. You are upside down on your car loan when you owe more on the loan than your car is currently worth. An upside down car loan is a loan with a balance that exceeds the value of the car resulting in negative equity.

That means you re 8 000 upside down. A few years later it might only be worth 15 000. Loans go upside down when the item you buy loses value faster than the loan balance decreases. But if an unforeseen financial setback means you need to sell the car you may need to come up with extra cash to pay off the loan difference.

Match your loan to your expected ownership length of time. Going upside down or underwater on your auto loan happens when the market value of your vehicle is less than the amount you owe. Let s say you ve got a 15 000 car loan and your car is valued at 7 000. So if you re the lucky owner of an upside down car loan don t worry.

Home equity loans home equity lines of credit. For example if you still owe 10 000 in interest and principal payments on your car but your car is only worth 6 000 on resale value you are upside down on your car loan. You ll have to write a check to sell the thing or. Instead of having positive equity in your car you have negative equity.

It s better to pay off negative equity before you trade in the car but you can also roll the balance into a new loan or find a dealer. What is an upside down car loan. Do you owe more on your auto loan than your car is worth. An upside down car loan occurs when you owe more on your loan than your car is worth.

If you are hopelessly upside down on a vehicle and need relief from that distressing debt selling the car and taking out a second loan to cover the negative equity could be the best option. In short if you owe 15 000 and your car is worth 10 000 you are 5 000 upside down or have 5 000 in negative equity. How loans get upside down. We re here to help.