Getting Rid Of A Car With Negative Equity – Here, you’ll learn more about equity, upside loans, and how to get rid of a car with negative equity!
Equity is the value of a piece of property, such as land or a vehicle. A person can own something with positive equity if the market value is greater than what the current owner paid. Alternatively, a person may own something with negative equity if the market value is currently less than what the owner paid.
Getting Rid Of A Car With Negative Equity
You can calculate your car’s negative equity by comparing the price of the vehicle to the amount you currently owe on your auto loan. For example, if your vehicle is worth $25,000, but your auto loan is $35,000, the negative value of your vehicle is approximately $10,000.
Negative Equity Explained On Vimeo
Upside loan is an alternative term for negative equity loan. If you have an upside down loan, it means you owe more than the amount you used to purchase the original loan.
Jumping into a car loan agreement without shopping around or doing research can leave you with an expensive car or an unmanageable repayment schedule. If your car loan accrues faster than you pay off your loan, you may have an upside down car loan.
To ensure you get the best car loan deal, shop around multiple dealerships before committing to any location or vehicle. That way you can get a good idea of what’s available in your area for your personal financial situation.
Buying a car with no money down can seem like a fantastic deal. Drive away with your new car without paying a dollar! However, these payments can sneak up on you later and make your car loan look incredibly terrible. Also, if the value of your car depreciates significantly, you can get a negative equity loan right from the start!
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Long-term car loans often end up as negative equity loans. The longer it takes to pay off your loan, the more likely you are to take negative equity.
Add-ons like a sunroof, upgraded stereo system, and more can add hundreds or thousands of dollars to your auto loan. Go into your car purchase knowing what you want, so you don’t let a sly salesperson talk you into add-ons you don’t need.
Interest is one of the most important aspects of a loan. Your car loan interest rate can dictate how long it will take to pay off your loan and how much you will owe in total. Excessively high interest rates can cause a regular auto loan to become a negative equity loan in a few years. Other loans that can come with extremely high interest rates:
Voluntary Surrender is a last option that involves a car owner deciding to surrender their vehicle to their lender because they are unable to repay their car loan. Voluntary surrender is a better option than repossessing your vehicle, which unfortunately can have a negative impact on your credit score. Voluntary surrender can significantly affect your credit score for years and can hinder your ability to find approval for car loans in the future.
Negative Equity On A Car Loan: What You Need To Do!
If your car has negative parts due to simple mechanical or cosmetic issues, see if you can fix those issues. To save money on labor, you can ask a friend or family member who knows about cars to help you with the job. There are also informative videos online that you can use to learn how to do simple car maintenance yourself.
Trading in your car is another way to get rid of a vehicle with negative equity. If they buy used cars, you can trade your car in with the dealer you originally bought the vehicle from. Keep in mind that if your car has a significant amount of negative equity, you may not get a lot of money from the dealership.
Also, you may not sell your vehicle privately if you are still paying it off. If you want to sell a car that you owe money on, you still need to find a buyer willing to cover the money owed.
The only way to get a negative equity car loan is to pay off the original lender. However, this process does not have to be as difficult as it seems.
Used Vehicle Loan Ltvs, Negative Equity Climb
Sometimes the fastest way to get a negative equity car loan is to refinance with a new loan. When you refinance auto loans, a lender takes your existing car loan and refinances it into a brand new car loan. You can choose to refinance your old loan with the same lender or do some research and find a new lender.
Staying on top of your car loan payments is critical to avoid default. Even if your current loan is a negative equity car loan, it’s better to make regular monthly payments than to ignore the loan while you look for a better deal.
To make things easier, you can choose automatic payments. That way, you can rest assured knowing you’ll never have a late or missed payment. Make sure you have enough money in your checking account!
Pay off your car faster by making extra or extra payments when you can. As you regularly pay more toward your monthly payment, you’ll reduce the interest charges and costs you’ll pay over the life of your car loan.
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In addition, or as an alternative to paying extra, you can make extra installments on your loan between payments. By making extra payments, you can reduce the time it takes to pay off your loan by months or years!
Set yourself up for success and avoid adding negative parts to your vehicle from the start. Check out some helpful tips below that can help you avoid getting stuck with a negative equity car loan.
Instead of putting them off, pay any taxes or fees associated with your auto loan right away. Paying off those fees in one lump sum at the start of your loan term means you won’t have to worry about them later. Paying fees and taxes in advance can save you interest charges down the road.
Cars lose about 20% of their value as soon as you drive away from them. To avoid getting hurt by this quick depreciation, try to make a down payment of at least 20% of your car’s Kelley Blue Book price.
Negative Equity Car Finance
If you can’t make the full 20% down payment, pay whatever you can. While a no-cash auto loan deal may seem appealing, you’ll likely end up paying extra over time.
Opt for the shortest loan term you can afford. The longer you take to pay off your car, the more you will end up paying and the more likely you will end up with a negative equity car loan. Look at the different loan terms available. Then, choose the shortest possible loan term for a monthly car payment that you can easily afford. It may be a good idea to aim for a monthly payment amount that is slightly lower than the maximum payment you can afford. That way, you have some breathing room if your money or monthly budget changes.
Regular maintenance is essential to avoid severe depreciation of your car’s value. Small problems like low oil or a flat tire can lead to bigger and more expensive problems if not addressed immediately. If you notice or hear something wrong with your car, take it to a mechanic immediately. Even if you don’t notice anything, it’s best to take your vehicle in for a checkup/tuneup at least every six months or so.
Before you sign your auto loan agreement and buy your vehicle, consider how often you drive. If you don’t drive your car often, leasing your vehicle is better than buying it outright. If you think buying a car is something you want to do in the future, there are even options where you can lease to own your vehicle.
How To Get Rid Of A Car With Negative Equity
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