Should You Trade in Your Car With Negative Equity?

Being upside down on your car loan is not uncommon. Here are your options.

Thankfully, you have a few options available to you that might help you manage this situation a little more effectively…

1. Wait to Trade in

Pretty simple, don’t sell or trade in your car. Wait till you’ve either paid the car off, or the car becomes worth more than you owe. If you financed with a high-interest rate, this might never happen.

2. Pay the Difference

If you can afford it, you should be making higher payments on your car than the payment they gave you when you left the dealership. This helps you clear the interest faster and helps you get back to an even equity status faster than paying the minimum amount. To find out how much you owe, contact the institution that financed your car loan and ask for the loan payoff. Then, turn to a valuation guide like NADA and find the difference between the two. If the difference is manageable for you, pay it!

3. Roll the Difference Over

If your lender in question allows you to do this, this can be a simple way to roll over the negative equity. However, you’re not really solving the problem as you’re just adding that negative equity to your new car, increasing the chances that you’ll be underwater once again. That hardly sounds like a solution to your current problem.

How to Get Out of Your Upside Down Loan

I’ve already given you three good options above. However, if none of these fit your needs you do have some alternative options available to you. In this type of situation, it’s always best to explore every avenue of recovery from an upside down loan.

1. Talk to Your Lender

Being honest with your lender isn’t always a bad idea. By talking to your lender, you can discuss the possibility of refinancing your car loan. If this is done right, you might be able to lower your interest rate. With simple interest loans, you’re able to pay more than the minimum amount each month without a penalty. As mentioned above, this is a sure-fire way of reducing your negative equity faster.

2. Consider a Personal Loan

If you can obtain a personal loan with an interest rate significantly lower than your car loan, you could use that to pay off the negative equity. You’ll still owe money through this new personal loan but be paying a much lower interest rate, effectively lowering the total amount owed altogether.

3. Consider Selling Your Car Privately

Out of all the options I’ve given you today, this is 100% your best option. Selling your car privately allows you to get the most out of your car, thus providing the best chance possible to get out cleanly without nasty negative equity. The only downside is that selling your car privately can be a huge time and sometimes monetary investment. Unless there’s an easier solution…

Luckily, there most definitely is and its From A-Z, carlisty takes care of the entire private sale process. They’ll inspect, photograph and list your car to millions of potential buyers – and all you have to do is relax and wait for your car to sell. It’s that easy.

Posted on

June 2, 2018