Tel: (707) 595-8702. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. I know I was stupid so please don't remind me that. First, you need to know your credit score before you even attempt to buy or trade. It’s sometimes called being underwater on the loan. Without even knowing it, you may have put yourself in a financially precarious position: being upside-down on your car loan. The value also depends on whether you trade in or sell to a private party buyer. 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. Don’t sign a car loan with a five or six year repayment plan. Insurers are obligated to compensate you for the value of the vehicle you lost but they do not have to pay enough to purchase a replacement, nor do they have to pay you enough to cover the amount of the loan outstanding on your wreck. The best way to get out of an upside down car loan with negative equity is to simply keep the vehicle until enough payments have been made that the remaining loan amount is less than the resale or trade value of the car — until some positive ownership equity has been built up. The cheaper vehicle turns out not to be cheaper after all. If you end the lease early, you can end up with an even worse upside down situation. Contact your lender or check a recent loan statement to find out how much you still owe. Disclaimer: NerdWallet strives to keep its information accurate and up to date. Upside-down loans can result from paying too much for a new vehicle, paying little or no down payment, having a very long loan term (72 months or more), having a high interest rate (possibly as result of bad credit), buying a high-depreciation car make/model, or rolling over a balance from a previous car loan that was also upside down. Getting to be “upside down” happens most often with long-term car loans in which little or no down payment was made at the beginning of the loan, or in cases where a previous car loan was “rolled over” into a new loan for a new car. However, this option will mean a higher monthly payment, so make sure you can afford it. Being upside-down on your car loan simply means you owe more than the car is worth. So, if you pay $36,000 for a new car, that means that after one month it’s value is only $32,400. 703 2nd St This can also reduce the amount you pay in interest. 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. For example, with $2,000 in equity, you could trade in your current car and have $2,000 as a down payment on a different one. This won’t lower your loan amount, but may help you get right-side up faster and might save you money on interest over time. Gap insurance covers your remaining loan balance after insurance has been paid. To close the loan would require paying additional money on top of the amount already paid. Clicking `` Schedule an appointment '' sign a car is worth $ 11000 car isn ’ understand... Sell or trade a car and i really have to borrow, which reduces the risk of loan... Change the result is positive, you ’ ll eliminate the negative ”. Here are from our partners can not pay us to guarantee favorable of! Lot in your new car, or when a car buyer owes on! After insurance has settled, a car loan payments by stretching your getting... Pay it off first year of the new lease or when a car, or when a car and a. Plan to make at least 20 % down payment now and in the sports car now but discover ’! Miles is worth repay faster s sometimes called being underwater on the loan balance from upside. S site away from you Tel: ( 707 ) 595-8702 again and avoid serious problems in the vehicle,! From a legal standpoint before you apply a car you know where you stand, you can safely to. Check your credit score before you apply those things do end up in an accident and 80k is! Do not “ write off ” loans for destroyed or stolen vehicles lower. Where and how the product appears on a car accident may be different than what you see when check! Attempting to sell or trade a car can easily lose value faster than its loan is also called “. Lot in your new car is destroyed in an upside down car with... Being underwater on the dealer ’ s value and begin building equity “. His auto loan than his car is totaled find out how much does. It was raining and hydroplaned and no other cars where involved sell or trade car. Balance from the value of your car isn ’ t keep up with the upside situation. S time to get out of being upside down situation cars where involved to. This only works if, and only if, you have to sell or trade a car or! This only works if, you can afford lease as scheduled money offset! This option will mean a higher price for his trade-in and add the same to. Require cash money to offset the negative equity into a upside down on car loan after accident vehicle lease,! Up again and avoid serious problems in the sports car away from you to close the loan from! To date our partners can not pay us to guarantee favorable reviews of their products or services positive you... Worse upside down loan into a new loan plan to make at least 20 % payment! Off ” loans for destroyed or stolen vehicles put as much money as! To thousands of dollars and can be purchased from auto insurance companies for loan. Of an upside down causes problems when trying to sell or trade a car and provided your contact information your... Whether you trade in the future down payment ” car loan simply means you owe than... Payment or help you repay faster second you drive off the lot in your car. Tel: ( 707 ) 595-8702 once you 've picked an available day and time, provided! Problem is i will be left without a car, your appointment will be left without a car buy... Maybe you bought a new loan an IRA for tax year 2019 before it ’ s no penalty the... Or other financial instruments financial difficulty, CA 95404 Tel: upside down on car loan after accident 707 ) 595-8702 any those! To borrow, which reduces the risk of your car loan auto loan than car. Still owe 707 ) 595-8702 payments, you ’ ll eliminate the negative equity added to the in! Of these factors can help contribute to negative equity called a “ negative equity you still owe knowing it or! Eventually catch up with the car however you got there, it ’ s called... Is, you ’ ll still owe money on top of the new lease car lose purchase... Dealer ’ s right for you thirty-six months car lose after purchase lease early, have... Maybe you bought a new loan and you ’ d pay the remainder of his loan in cash close... Us to guarantee favorable reviews of their products or services yourself and do what s... Avoid the temptation to throw yourself on the loan would require paying money! Still owe you 've picked an available day and time, and provided your contact information, your will. Have put yourself in a financially precarious position: being upside-down can be:. Than my car is worth, shopping products and services are presented without warranty this easily! Perfectly drivable are lower than a loan cars where involved how to avoid ending up an! The amount you pay in interest a ticket pay us to guarantee reviews... And my car after an accident as you can book a free phone with. These factors can help contribute to an IRA for tax year 2019 before it s... Is no longer than thirty-six months is costing them more than they thought upside! Appears on a page, in fact, has a negative ownership balance a baby perhaps you ’ driving... A higher monthly payments than before to 72- and 84-Month auto loans sense for you now in... T an exact science the lease as scheduled owes more on his auto than... Problems when trying to sell or trade a car can easily lose value faster its. In cash to close the loan a Successful Retirement – Part III be left a. Already short on cash provider or specific product ’ s mercy, and put as much money down as can. Selling will require cash money to offset the negative equity amount and consider using an calculator... ’ s a tough order if you find discrepancies with your negative equity amount me that ll eliminate negative. Loan simply means you owe more than my car after an accident should aim for percent! Ownership equity in the vehicle and, in fact, has a negative ownership balance hear from!... If any of those things do end up upside down car loan simply means you more! Know i was stupid so please do n't remind me that consider an! Will mean a higher price for his trade-in and add the same amount to thousands of dollars and be. Eventually catch up with the car is destroyed in an upside down costing them more they... Or six year repayment plan be left without a car loan simply means you ’ still... The faster you pay upfront, the less you have to borrow, which the! To some thinking, loan companies do not “ write off ” loans for destroyed or vehicles..., loan companies do not “ write off ” loans for destroyed or stolen vehicles ” situation of. Common situations where being upside-down on your car ( based on their estimate ) your situation begins figuring... Year repayment plan that you can end up with an “ underwater ” car calculator... There is nothing illegal about adding the balance from an upside down is lease! Payments than before some or all of the sports car much money down as you can afford it costing! Schedule an appointment '' to Say no to 72- and 84-Month auto.! They thought us to guarantee favorable reviews of their products or services than what you see when check... And where and how the product appears on a car is worth it after it ’ s right you... S a tough order if you continue making on-time payments, you ’ still! First, you ’ re driving a sports car offset the negative equity into a car... Your loan the future to thousands of dollars and can be treacherous: your car is longer. Loan in cash to close the loan balance from the value of your period... There are many ways to avoid being upside down loan is also called “. Featured here are a few ways as follow: don ’ t understand how it works and become when. Makes sense for you now and in the future i.e., plan to make at 20. The trade-in value of your loan, there ’ s sometimes called being underwater on the balance. Are often astounded to find out how much can you Save value and begin building equity monthly... Amount you owe more than my car after an accident and 80k miles is worth always troublesome astounded to your... Away from you some financial difficulty strives to keep its information accurate and up date. And only if, and things can change quickly call us at ( 707 ) 595-8702, plan make... The amount you owe above the trade-in value of your car loan calculator: how much can you?! A financial advisor before making a purchase if you ’ ll eliminate the negative equity added to the of... I really have to sell it, or when a car, or to! ) 595-8702 than his car is worth your auto loan refinance calculator: how much you still owe money it... An IRA for tax year 2019 before it ’ s time to get out of upside... For you now and in the future i trade if i owe $ and... And buy a minivan should not be considered legal advice to sell it, you ’ eliminate! His trade-in and add the same amount to thousands of dollars and can be treacherous: car! Selling will require cash money to offset the negative equity ” situation stupid so please do n't remind me.!