Discover How To Get Out Of An Upside Down Car Loan
I want to get out of an upside down car loan - what do I do? Before exploring your options, here are a few things you'll want to know and do.
An "upside down car loan" is a term used to describe a vehicle that is worth less money than what is owed on the loan. If you owe $20,000 on your car and the value of your car is only $15,000 then you are $5,000 upside down. In other words you have $5,000 of negative equity that you are responsible for. Most people today are upside down on their car loan. Here are some tips and options you can do to turn your situation around.
Wrong Option: "I'll just give my car back to the bank!"
Not a good idea! Yes, you can give the vehicle back to the bank. However, a voluntary repo will hurt your credit. You can't just walk way from the loan. The bank will take your vehicle to the auction and take whatever they get; and then they will come after you for the balance of the loan.
Here are some more positive options:
Vehicle Value:
Research the value of your vehicle. Check out the Kelley Blue Book, N.A.D.A book (National Automobile Dealers Association) or Edmunds.com and get the value of your car in todays market. You can also research Cars.com and Autotrader.com to see what similar vehicles are selling for. This will give you a good idea for establishing the value of your car.
The how to get out of an upside down car loan isn't always easy, but the effort and energy in turning it around can be well worth your time.
Sell Your Car:
You can sell your can even if you owe more than what it is worth. Keep in mind that you have to make up the difference from what you sell your car for and what you owe to the bank. Call your bank and get a payoff on your vehicle. This option works as long as you want to sell your car, and the extra money to pay off the balance of your loan makes sense. It's true you still have to pay off the negative equity. But you are paying it off over time while your vehicle's value only decreases with time. Set up a budget to help payoff the negative equity before you sell your car.
Lease A Vehicle:
Usually you can lease a vehicle for a more affordable monthly payment. To lease a vehicle you need to have excellent to good credit. Some leases you can get approved at 120% of the value of your new car. You can roll over your negative equity into the new lease. After your lease is up you can walk away from the car and not have any more negative equity to worry about.
Purchase Another Vehicle:
Today most states offer tax savings when buyers trade in their car for another purchase. This option works well in areas with higher tax rates. Let me give you an example how this works. If your trade value is $12,000 and your tax rate is 7%, you'll save $840 in tax charges. If you are looking at purchasing a new car, many manufactures offer rebates, which can further help to offset your negative equity.
Talk With An Auto Broker:
If you don't want to go through all this hassle and grief you may want to consider working with an auto broker. Brokers are generally more creative when it comes to things like this and they work in your best interest. They represent you similar to how your realtor represents you in the purchase or sale of a home.
Article Source: http://EzineArticles.com/6130104
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