Explanation of a Loan Balance

Car driving out of garage made of credit cards
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A loan balance is pretty self-explanatory: a loan balance is simply the remaining amount you have left to pay on your loan. It can often be different than the payoff amount, which is the amount you’d need to pay today to completely pay off your loan. Every loan you take out will have a loan balance until the loan is entirely paid off. Your loan balance changes on a daily basis because interest is added daily.

In addition to thinking about the amount of insurance, gas and car payment you can afford month to month when searching for a new vehicle, your existing car loan balance will impact how much vehicle you can afford and should help guide the sorts of cars you’re considering purchasing. 

If you own a vehicle that you purchased with financing but are looking to trade it in for a new one, it’s important to know what your loan balance is before you ever walk onto the dealership lot.

Outstanding Loan Balance

Unlike on a school report card, an outstanding loan balance isn’t a good thing. Hopefully, you’ll never see this item listed on your statement. An outstanding loan balance usually refers to a past due amount. If you are late on your loan payments, you are probably looking at a notice referring to your outstanding loan balance. It could be referring to just the loan payment which is past due, or the loan balance in its entirety.

Best Loan Calculators

If you cannot find your loan statement, you will need to know a few details about your loan to calculate your loan balance. Use a traditional loan calculator and input the remaining time left on your loan, your monthly payment, and your interest rate. Of course, you can also call your lender or visit their website to get an accurate statement of your loan balance.

Best Loan Balance Calculator

Or get straight to the number you are looking for with a loan balance calculator.

Trading in a Car with a Loan Balance

Typically, it is not a problem to trade in a car even if you have a remaining loan balance. If the value being offered on your vehicle is higher than the amount you owe, you will come out ahead. You can then pay off your loan and use the remaining balance towards your new car purchase.

Some different options are available for you if you owe more than the dealership is willing to pay for your trade-in. You have the opportunity to pay off the remaining balance on your own, or you might be able to roll your remaining balance into your newly financed car loan

However, this method is not without risk. Rolling over your loan balance will almost certainly put you upside down on your new car loan. Being underwater on a loan is never a good idea, and having an upside down car loan will often be more headache than its worth, requiring additional insurance and stress. If you do have to roll over your loan balance, you will need to work hard to pay down the balance quickly.

Of course, it is best to avoid all of this by purchasing a vehicle you can afford to pay off before you trade it in for a newer one. The grass may always be greener on the other side, but adding hundreds or thousands of dollars onto the price of your new ride isn’t any fun.