3 Options for Upside Down Car Loans
Due to various circumstances, consumers often face the need to extend their auto loan for longer than four years, which allows them to make lower car payments. Another reason for an upside down car loan is negative equity on a previous loan. If you roll over the negative equity to your new auto loan, the result is an upside down car loan. This means that the loan would be for more than the car is worth. Under such circumstances, getting out of the upside down car low would present a challenge. The reason is that the auto would be worth less than the balance on the loan. With this in mind, you might wonder about your options if you cannot make your car payment anymore. Does this mean that you have no other recourse but to have the car repossessed? Not necessarily. Notice the following scenarios:
1. Contact your financing institution if you have an upside down car loan. Ask your current lender to finance the difference. If the institution is agreeable, you can sell the vehicle and make payments on the remaining balance of the auto loan. Most people view paying on a car they don't have as foolish and unwise. However, if the monthly payments are manageable and your goal is to get out of debt, you can work hard to pay it off as soon as possible.
2. Pay off the upside down car loan with an unsecured loan. If the financing institution does not agree to finance the remaining balance on your current auto loan, consider visiting your local bank or credit union. Unless you have a second vehicle, request $1,500 over the upside down amount. This way, you can pay off the auto loan and have $1,500 left to buy a used car and have enough to cover the taxes and plates. Now you can sell the vehicle, pay off the upside-down loan in full, and buy a used vehicle to get to work. Once you pay off the unsecured loan, you'll have enough cash to upgrade to a newer car. Unfortunately, if your credit is not good, this option may not work for you. In such case, you'll need to consider option number three.
3. Save to get out of your upside down car loan. Your third option involves saving until you can come up with the balance to pay off the auto loan and buy a used car. Making a budget is the first step to accomplishing your goal. You will likely need to take on a second job or sell things you already have. Get rid of any unnecessary services such as cable or club/magazine subscriptions.
Getting out of an upside-down car loan requires some sacrifices and lifestyle changes. A person needs to set priorities. Keep in mind that the options outlined above are not for everyone. For example, if having a new car is a "must" for you, you cannot benefit from these suggestions. In addition, if what other people think is important to you, you may need to find a different solution to your dilemma. On the other hand, if livings within your means and having peace of mind are at the top of your list, these options can help you get out of an upside-down auto loan and regain control of your finances.
Copyright © 2011 Ana Jackson. All Rights Reserved. Reproduction in whole or in part constitutes plagiarism, is illegal and strictly prohibited.
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