100% Financing Loans And Balancing Negative Auto Equity

When it comes to applying for 100% financing loans, if you have negative equity on your car, you will have to settle a few things before you will qualify. In order to be eligible for no money down loans, you are typically required to have excellent credit, and many potential lenders will not approve your application if you owe more on your trade-in than it is worth. It is important that you balance out the negative equity on your current car first or find an arrangement that will do so. Only then will you get the auto loan terms you seek.

Your first call should be to the holder of your current loan. Find out from them how much you owe on your car. This amount is called the payoff. Once you know it, you can find out the determined value of your car from a reputable appraiser such as Kelley Blue Book. Knowing these two figures, you can accurately assess your situation. If the amount you owe is greater than the value of the car, you have negative equity, and it must be remedied before you will be approved for 100% financing on a new car.

The most basic way to remedy negative equity is to forgo purchase of the new car for a period until which time you have brought the amount owed down to less than the car's worth. By increasing your car loan payments, you may be taking on a bit more financial burden each month, but your goal is to erase the negative equity. Once you owe less than the car's value, pending application approval, there should be no issue with the trade-in.

Another option you might consider involves a little preliminary research with prospective dealers. Inquire around and find out how much of a rebate you can receive with a new car purchase. If, for instance, you owe $13,000 on a car valued at $10,000, you have $3,000 worth of negative equity. If a dealer is willing to give you a $3,000 rebate on your purchase, you break even in terms of the car's value and what you owe. At this point, being approved for 100% financing is more feasible.

You should also find a dealer who uses your highest credit rating. Because there are a few companies who compile credit reports, they are not always the same. Find out the highest of them and make your purchase with a company that uses that one.

Your credit score will factor greatly when being considered for 100% financing on an auto loan. If you have negative equity on your trade-in, you will have to first balance out that figure. Laws are different state to state, but chances are if you owe more on the car than it's worth--even if you can trade in a car with negative equity--you probably won't be approved for a no-money down loan. Take the time to figure out what you need to do to get out from uder the negative equity first, then you will be in a better position to apply for 100% financing.