Help! I Am Underwater on My Car Loan
So you did some calculating to determine if your car loan is underwater, turns out it is most definitely underwater. What can you do about it?
Why You Don't Want to be Underwater
- When its time to sell, you will have to pay difference.
- If you are in a total loss accident, you will have to pay the difference.
Time to Start Saving
Unfortunately, the only way to get out of this mess is to start paying down your loan as fast as possible.
Some ideas how to pay down your loan include:
- Figuring out how much you are underwater and paying that amount as a lump sum on your next car payment. (Its a nice idea, but most of us cannot afford it.)
- Calculate what you can afford each month and add that amount to your monthly car payment.
- Look into refinancing your loan to a shorter term. Your payments will increase, but hopefully your interest will decrease.
Get Some Protection
Gap insurance is most often talked about for covering the depreciated value of your vehicle in case of a total loss accident. Gap insurance is most commonly sold at the time of purchase of a brand new vehicle. It can be hard to get if you have owned the vehicle for some time, or if the vehicle was purchased used. Look for an insurance policy which offers Loan/Lease Payoff. This coverage is perfect for used vehicles, however usually comes with a cap in the amount of coverage provided.
More Help With Underwater Car Loans
- Gap Insurance vs. Loan/Lease Payoff
- Top 10 Car Loan Payment Calculators
- Pros and Cons of Refinancing a Car Loan
Still Have Questions? Connect with Me on Twitter @CarInsReview