How Can I Get Out Of A Car With Negative Equity
negative equity is a big problem. if you want to be debt-free, i suggest finding another vehicle with a lower price tag and transferring the negative equity from your current vehicle to the next one. if there is no way out of your negative equity situation, consider a leasing option where you only need to pay for the lease term not for any depreciation in value. it’s important that you read over all contracts before agreeing on anything as well!
Sell To A Private Party
Although selling your car to a dealership offers a quicker way to dispose of your car, you will not get the best value from a dealer. Dealerships buy vehicles at a wholesale price to enable them to make a profit. On the other hand, looking for a private buyer takes time, but it offers the best value. For example, if your cars buyout price is $10,000 and you are $5,000 upside down, the dealership will give you $10,000 and leave you with a $5,000 balance. If you look for a private buyer, you may find an individual ready to pay more for your car than the dealer. However, this strategy leaves you without a vehicle to use for your day-to-day activities.
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Why You Want To Get Right
If you have an upside-down car loan, its not always a problem. Its possible to keep up with payments and keep your car until the loan is paid off. However, it does put you at risk if a tricky situation comes up in Galesburg. Some common examples include:
- Your car gets totaled: If you have an accident, your insurer pays out the current value of your car However, if youre upside down, that value is less than the amount you owe your lender. That means youll have to pay the difference, which could be thousands of dollars.& nbsp
- Youre struggling with payments: If you cant make ends meet and can no longer pay your payments, you probably want to downsize to a cheaper car. However, with an upside-down loan youll have to give your car and pay the negative equity. If youre already short on cash, this could be tough.
- You need a different vehicle: Lets say you have a sedan and now you need a truck for your job. If youre upside-down on your car loan, trading in the sedan will cost extra before you can even get your truck.
How You End Up With An Upside
It isnt difficult to find yourself in an upside-down car loan situation. Perhaps you financed the vehicle with no money down while this may be the most financially viable option for you, vehicles can lose as much as 20 percent of their value in the first year of ownership. Therefore, it wont take long for the depreciation of your vehicle to overtake your equity, even if youve been making payments on time.
Another way people find themselves with an upside-down loan is by taking a car loan with a longer repayment term. Some lenders allow borrowers to finance new cars for up to 84 months , so your car may have depreciated beyond your original purchase point by the end of that period.
Remember, in the early years of the loan, a bigger chunk of your payment goes toward interest rather than toward building equity in the vehicle. Similarly, the higher the interest rate you pay, the more youll pay to the lender in interest and the less that goes toward paying down the principal value of the auto loan.
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Voluntarily Surrender The Vehicle
If you’ve defaulted on your auto loan, the lender may choose to repossess the car. The process isn’t pleasant, and it can wreck your credit score. If you want to avoid repossession, but you have no other options, you can voluntarily surrender the vehicle to your lender.
A voluntary surrender allows you to return the vehicle to your lender on your terms, and while it can damage your credit, it won’t have as big an impact as a repossession. You’ll also be able to avoid certain repossession-related costs, which lenders may choose to add to what you owe. If you feel as though this is your only option to avoid a repo, contact your lender to set up a time and a place for the vehicle to be turned in.
How To Escape A Negative Equity Auto Loan
If your car loan is upside down, its time to consider options to get out from under it. Here are a few ways to do so:
Sell or trade it to a dealer. If you really cant afford another car right now, you can sell yours outright to a dealer. Theyll pay off most of the loan remainder and then youll need to come up with the difference in cash, or by taking out a small personal loan, which will eliminate subsequent car payments. You can also trade it in for a less-expensive model by applying the trade-in value towards a down payment, or purchase one you wont have to finance. Either way, you wont receive any cash because of the negative equity factor.
Refinance your existing car loan. This will only work if a lower rate or longer loan terms are available. Be careful not to take out another loan where the finance terms exceed the cars value like before. To do so, run the new loans terms through an online loan calculator first to ensure it wont go upside down. Keep in mind refinancing will serve as a short-term affordability solution, and only if you plan on hanging onto the car for quite some time.
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How To Get Out Of Your Upside Down Car Loan
August 19, 2019 By Gauge Magazine
Do you have the new car bug, but youre upside down on your current car? Read on to learn how to get out of your upside down car loan.
Americans are behind on their auto loan payments. As many as 7 million Americans are at least 90 days behind on their loan. This isnt the only problem car loan borrowers have many face an upside down car loan.
If you are struggling with your car loan, you have options. We are going to help you breathe easy and get out from underneath your upside down loan.
Try these tips and get right on the road again.
How To Get Out Of Upside
Being upside down on your auto financing, when you owe more than your vehicle is worth, can come as a surprise.
Perhaps it was too small of a down payment when you bought the car, too long of a financing contract, or choosing a vehicle you really couldnt afford.
However the situation arose, heres some better news there are several ways to reach positive equity and enjoy a firmer financial footing.
Take a look at the following options, and learn how to finance your next vehicle with Chrysler Capital.
Ways to get out of upside-down financing
Add to your monthly payments
One possible solution is to pay down your principal balance more quickly. This can be achieved with a number of approaches, including putting extra cash toward your monthly payment or making a lump sum payment.
Pay more frequently
More frequent payments could also help. Try splitting your monthly payment and paying half every two weeks, which effectively adds up to another full payment by years end.
Hold on to your car
The simplest choice might be to hold on to your car, maintain regular payments and wait until your debt dips below the vehicles value. When this happens exactly will depend on factors such as the rate of depreciation in your cars value and the size of your monthly payment. If waiting doesnt appeal you may want to change cars sooner rather than later, for instance then there are other avenues to pursue.
Trade in carefully
Finance your next vehicle with Chrysler Capital
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Why Is Negative Equity Bad
Are you wondering why this is a problem? After all, youve made all of your payments in full and on time. This is where things get tricky, there technically isnt a problem, until there is a huge problem.
The problem occurs when you need to pay off the balance of the loan, but you discover the value of the car isnt enough to cover what you owe. That is why it is generally advised to go for 3-9 year old cars that loose not as much value over time or go with cheaper options, for example cars that are available at buy here pay here dealerships
How To Buy A Cheap Used Car
Now that youve gotten rid of your vehicle and the payment that came with it, youll still need something to drive. I recommend scrounging up what cash you have and looking at your options. You should be able to get a decent, roadworthy car for $2000-2500. I wouldnt recommend spending less than this unless you know how to properly inspect a used vehicle , or if youre buying from a trusted friend or family member.
Here are a few tips to help you find a good cheap used car to drive now that you dont have a payment.
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How To Get Out Of An Upside
6 Minute Read | September 13, 2021
Everyone knows theres nothing quite like a brand-new car. Theres just something about leather interior, a shiny console and those fancy cup holders that warm your drink with the push of a button.
But dont be fooled. No amount of Armor All can keep your new car from losing a chunk of its value the moment you drive it off the lot. And if you purchased the car with a loan, you just increased your chances of having an upside-down car loan.
So, if youre the lucky owner of an upside-down car loan, dont worry. Were here to help.
How Does A Car Loan Become Upside Down
A car loan can go underwater in several situations. Financing a new car with a long term is one common way especially if that term is longer than 60 months.
Having a high interest rate, foregoing a down payment or buying a car thats out of your budget can also lead to an upside-down car loan. And rolling over a previous loan during a trade-in also puts your loan at risk of becoming upside down.
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Beware Of Rising Interest Rates
As you can see, both consumers and dealers are coming up with highly creative ways to deal with this growing issue. The biggest danger is that rising interest rates even increases as small as one percent could equate to an increase of several hundred, or even a few thousand dollars over the life of the loan. With some loans being financed for terms as long as 96 months , the effect of rising interest rates and the practice of rolling-over an existing loan into a new one could result in an unfortunate situation that would negatively affect your personal financial health. And all for a new car.
Key Takeaways On How To Get Out Of An Upside Down Car Loan
Being underwater is never fun. If you have an upside down car loan, its important to act fast, so you dont fall further into debt. While your car begins to depreciate, your loan and its interest rate will still be there. From refinancing your car to selling it, these tips on how to get out of an upside down car loan will help you stay afloat and build equity in your vehicle.
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How To Fix Your Upside
A common problem that most drivers on the road have today is their car, truck or SUV’s value drops pretty quickly after buying especially if you bought new. You’ll soon find yourself paying for more than the vehicle is even worth. This can cause a lot of problems when you need to replace your car or simply need to improve your credit and vehicle’s worth.
At Auto Credit Express, we know that sometimes life catches up to us in unpleasant ways, but we’re here to help you turn your credit around and improve the quality of life that you and your family enjoy.
Get A Vehicle History Report
It doesnt cost much to pull a vehicle history report and honestly, its completely worth it. Most reports will tell you a lot about the history of a vehicle. In some cases, things that the current owner might not even know. You can learn:
- If the vehicle has been in an accident in the past
- Whether it has ever been a rental
- If it has been a taxi
- Vandalism and other non-collision claims
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Guide On How To Tell If You Are Upside Down On Your Car Loan
Before we look at how to get out of an upside-down car loan, you should be able to calculate your equity. You can calculate the equity by subtracting the loan balance from your vehicles buyout value. A positive figure means you have positive equity, while a negative amount means you are upside down on your loan. For example: If you have a loan balance of $20,000 and your vehicles buyout is $22,000, you should subtract $20,000 from $22,000 to get $2,000, which is your positive equity.
On the other hand, if the loan balance is $25,000 and the vehicles value is $22,000, you should subtract $25,000 from $22,000 to get negative $3,000, which is your upside-down amount. Your underwater amount will depend on the value you can get for your car. If you get a private buyer willing to pay $24,000 for your vehicle, you will reduce the negative equity to $1,000.
How To Get Out From Under Your Upside
Car loans are a tricky business. Your car is a continually depreciating asset, and the more you use it, the faster the vehicle depreciates in value. The consistent drop in value complicates matters when you take out a car loan, and the payments you make dont keep pace with the depreciation rate. Once your cars value is less than your loans outstanding interest, then your loan becomes an upside-down loan.
Upside-down auto loans frequently happen on loans with longer lengths of terms. While the monthly payments may be lower, keeping pace with the depreciating value of your car can prove challenging. Your options for dealing with an upside-down loan are limited, but there are ways to get out of your predicament.
Getting the maximum value out of your auto loan generally leads you to one of two options. The first option is to ride out the loans lifetime and deal with the depreciating value of your vehicle. If you decide to sell the car before you finish the loan, you will lose money due to the negative equity. However, there is another way out of the upside-down loan. Once you trade-in your car, auto dealers will buy out the remainder of your loan balance. Peruzzi Nissan will help you get into a new car and out from under your upside-down loan if youre in Langhorne, PA or the surrounding area.
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Think You Might Have An Upside Down Car Loan
To find out for sure if youre upside down on your car, go to a website such as kbb.com or edmunds.com and fill in the information for your car .
If you determine that you really are upside down on your car loan, then your best option might be to hang on to your car until you can pay down the loan enough that you arent upside down anymore.
However, if you are in a position where you feel you really need a different vehicle, then if possible, you should pay the difference of what your car is worth and what you owe on it with cash.
You can pull the money from savings if you have it , or you can work to earn the extra money as quickly as you can by working overtime, picking up an extra job, or doing a side hustle.
