Underwater Car Loans : Sink or Swim
Is your car loan more then your vehicle is worth? Well if so then you are what is known as underwater or upside-down in your loan. Let’s discuss a few options to get you back on track and make sure this never happens again!
First we will need to figure out the actual current value of your vehicle. Grab my vehicle value worksheet to get you started.
Now that you have figured out it’s value let’s see what your options are.
#1.) You can sell the vehicle for what it’s worth and write a check for the difference and be done with it. The only thing with this option is that you are left with no vehicle. If you have wonderful public transportation and can make due without the use of a vehicle then that is a great option why you recoup your losses. Now you can save and buy again (and buy right) when it makes financial sense.
#2.) Roll the negative equity into a new (used) vehicle purchase.
This takes patience, a lot of research and educating yourself about values and financing so you don’t end up in an even worse case scenario.
Be sure to purchase a used vehicle with a high residual value that will retain a good percentage of value thus depreciate at a slower rate.This will even out the loan amount gaining equity in your vehicle rather then taking on more water.
Get the shortest period of time to pay off the loan as financially possible!
Shorter the loan=Faster you gain equity
If you do this right you may be able to pay off your car, sell it and put some money in your pocket.
#3.) Refinance your loan
Visit with your local credit union or small bank to try to refinance your auto loan at a better rate. This is especially good if you purchased with a really high rate, your credit has improved, or you have made substantial payments towards the loan.
They can also discuss changing the length of the loan and monthly payments to get you on budget and back on track.
*Tip💸 Try www.bankrate.com to experiment with loan terms
The most important thing is to get yourself out of this mess and to never do it again! Most sales people do not care one bit about you being underwater or your budget or you personally whatsoever. They are in the business of making and taking money so always do your homework and look out for YOU!
Want more so you can be fully prepared for your next vehicle purchase?
Get the car buying cheat sheet now so you know exactly how to buy your next vehicle. The value is made when you purchase a vehicle not when you sell it.
Be sure to buy right!