Can You Roll Over Negative Equity?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - January 16, 2019

Also called being underwater on your trade-in, owing more than your car is worth can make the car buying process tough if you’re looking to trade in your current car. Some lenders allow you to roll over negative equity into your next auto loan, but many don’t. The good news is you have other options to choose from. At the same time, if you want to roll over the negative equity and the lender allows it, you need to be aware of a few things.

Options for an Underwater Car Loan

First, rolling over your auto loan balance doesn’t eliminate negative equity – you still have to pay for the old loan on top of the new one. Secondly, you end up starting out with even more negative equity on your new car and are probably going to remain underwater on your new auto loan longer, which means you may be in the same position you’re in now when you want to sell or trade in your next vehicle.

If you’re uneasy about the idea of being underwater for a longer period of time, you have two options to consider:

  1. Pay the difference – If you have the cash, you can pay the negative equity right then and there. You need to get the loan payoff amount from your current lender and get an appraisal on your current vehicle. Subtract the appraised value from the loan balance, and the difference is the amount you need to pay off the loan.
  2. Simply wait to trade – If the lender doesn’t allow you to roll over the negative equity, or you don’t have the cash to pay the difference, you need to wait until the car has equity to trade it in.

Tips on Getting Out from an Underwater Loan

If you want to get out from being underwater on your car loan, what do you do? Depending on your situation, it could be as simple as paying the difference in cash, or waiting until you’re no longer upside down.

When you can’t pay the difference, you have three alternatives to help get yourself out from being upside down:

  1. Talk to your lender – Before you get the trade-in process started, talk to your lender and see what they can do to help you. You can always pay more each month to reduce the negative balance more quickly, or you may be able to refinance your current loan at a lower interest rate.
  2. Take out a personal loan – You may be able to take out a personal loan to cover the negative equity. Make sure you’re financially able to handle a personal loan in addition to an auto loan.
  3. Sell the car privately – When you sell a vehicle privately, you may be able to get more than a dealer offers. In this case, the selling price must not only cover negative equity, but be reasonable to attract buyers.

Ready to Trade in Your Car?

The car buying process can be complicated if you don’t have equity in your trade-in. Although you may be able to roll over the negative equity into the new loan, it may not always be the best option. If you’re ready to trade in your vehicle for a new one, but worry your credit is holding you back, let CarsDirect help.

We work with a nationwide network of dealerships that have the lending resources available to help credit-challenged car buyers. We want to help you get the car buying process started. Simply fill out our free auto loan request form, and we’ll get right to work connecting you to a local dealer.


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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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