If you are dealing with a bad car loan or an upside down car loan, learning how to get out of that car loan through refinance or other options is a vitally important process to understand. There are a number of different ways that you can end up in a bad car loan, one of which is to be upside down in a car loan. What this means is that you owe more on a bad car loan than the vehicle is worth, making it a completely worthless car loan all together.
As many as 30 percent of all new car shoppers are upside-down in their current car loans. There are many dealerships and lenders that intentionally try to take advantage of people who are buying with poor credit. If you are dealing with an upside-down bad car loan, you have two options. First, you need to figure out what you can do about your current car loan. Then, you need to figure out how you can protect yourself in the future.
Step #1: Determine Your Options
First and foremost, you should check with the consumer affairs office in your state to see if you have any kind of legal recourse. Next, you should consider whether or not you are having difficulties making your payments. If you sell the car for what it is currently worth, you will still owe money to the lender, which is what being upside-down is all about.
Step #2: Determine the Car's Future
Do you really want to get rid of the vehicle? If you are not planning to get rid of it, then you should not be worrying about whether or not the loan is upside down, just focus on paying it off. This is especially viable if you are more than capable of making the payments. Do you need a new vehicle, or can you keep driving the one that you are paying off? Consider this long and hard before you try to get rid of a vehicle that you are upside-down on.
Step #3: Avoid Trading In
If you trade your upside-down car in for another car, you will end up owing more money on the new car than it is worth as well, only digging a deeper hole financially. This is not going to solve your problem either.
Step #4: Consider Refinancing
One of the best ways for you to get out of a bad car loan is to consider refinancing it. Before you begin to shop for a new car loan you should check to find out if the existing loan is capable of being repaid early without penalties. You should also find out if it is possible for you to renegotiate the loan with the original lender. If you can pay your bad car loan off early, you can shop for a cheaper loan with a lower interest rate or a longer loan term, which will make the monthly payments more manageable and take away some of the burden.
When it comes to dealing with a bad car loan, it is good to thoroughly investigate what's best for your situation.