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upside down auto loan

Options for an “Upside Down” Car Loan

Do you feel like you are drowning in debt for your vehicle loan? This might be because you’re “upside down” or “underwater” on the loan. This means that what you owe on your car is more than what your car is worth. For example, if your car is worth $5,000, but you owe $8,000, then you’re upside down by $3,000. This might be a problem if your car is older or unreliable and you are looking for a new car, or if your loan payments are too expensive.

Now, you might be wondering: How do I know if I am upside down on my loan? To determine if you are upside down on your loan, you need to determine 1) what you owe, and 2) what your car is worth. To figure out what you owe, you can contact your lender and ask for your “payoff amount.” Then, use one of the numerous free online industry guides to determine what your car is worth. Some of the most popular guides are Kelley Blue Book and Edmunds. You will need to know your vehicle’s make, model, mileage, and condition. Once you have determined your car’s value and what you owe, compare the numbers. If the value is more than what you owe, you are not upside down. If the value is less than what you owe, you are upside down on the loan. While being upside down on a loan can be frustrating, don’t worry—you do have options!

Option 1: Ride the loan out

If being upside down on your car loan is not a big issue for you, you might simply continue making your planned monthly payments until you have paid the loan off.

Option 2: Refinance your loan

Another option is to refinance a car loan. This essentially means that you are taking out a new loan with a lower interest rate. If your interest rate was high when you took out the initial loan and you are eligible for a lower interest rate now, this might be a great option for you.

Option 3: Make extra payments or larger payments 

Making payments more often (every two weeks instead of one per month) or tacking on an extra $50-$150 dollars per month to your loan payments can help you pay the loan off more quickly.

Option 4: Sell your car 

Consider getting rid of your current car and starting over. In this situation, you can either sell your car privately or make a trade with a dealership. To determine the best option for you, use one of the online industry guides such as Kelley Blue Book to determine how much your car could sell for privately and contact a local dealership to determine your trade-in value.

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While great effort is made to ensure the accuracy of the information on this site, errors can occur. Please verify all pricing information with a customer service representative. This is easily done by calling us or visiting us at the dealership.

Customer may not qualify for ALL Rebates shown. Some rebates are stackable and others can and cannot be combined. See Dealer For Complete Details.