Upside Down Car Payment - How To Get Out
An upside down car payment is when you owe more for a car than the car is worth if you sold it. Today some car dealers will do whatever it takes to sell you a car. Many people that have no business buying another car are able to get loans. Dealerships and investment companies will even give you a loan while you still owe money on the car that you want to trade in. Buying a car like this will give you an upside down car payment.
Remember, most importantly, if you do not have your car paid off, it is not time to buy another one.
For those that are upside down in a car loan, there is a way to get out of this situation and cut your losses. Just like getting out of credit card debt it is painless and you will have to sacrifice, but for the well being of you and your family’s financial future it is the right thing to do.
Let us use an example to illustrate the solution to the upside down car payment problem.
Let’s say you have a car that is worth $10,000 and your loan balance is $15,000. The way to remedy this situation is to sell your car and get a loan for the balance owed, plus about $3,000 extra to purchase a cheap car to drive. In this example you would have to get an $8,000 loan to accomplish this. It is then much easier to pay off the $8,000 than it would have been to pay off $15,000 and you can eliminate this debt along with your other bad debts. Just include this $8,000 and pay it off as fast as you can.
You will likely have a higher loan rate on the lower loan amount, but do not worry about this. You will be paying off the loan as quickly as possible. If you were making the payment on the $15,000 loan you can continue to make the same payment on the $8,000 loan and pay it off much quicker, if this is the only loan that you have.
If you also have credit card debts that you are paying off you would just include the car loan in with the credit card debts and continue to pay them off from smallest to largest. Take the extra from the original car payment and add this amount to the payment on the smallest debt. In essence you just treat the car loan like it is credit card debt.
A car dealer is not doing you a favor by helping you finance another car when your car is not paid off yet. They are just putting you deeper under the burden of debt. Do not let yourself get caught up in an upside down car payment, get out from under it now.
Upside down car payments are also called upside down car loans, which is likely more grammatically correct.
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