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Negative Equity Car Loan - How To Get Out!

Negative Equity Car Loan - How To Get Out!

Negative equity, being upside down in an auto loan, isn’t a bad thing. In fact, it’s usual when you’re at the beginning of any loan. But if you don’t like the position, you can get out from under it. Our Puslinch auto loan team will show you how.

 

The vast majority of auto loans will involve being upside down for a few months at least. This is especially true if you’re buying a new car and not a used model. It’s not a bad thing though, it’s just how loans work.

 

Lenders front load interest so you pay a higher proportion of interest at the beginning of the loan before it evens out further in. So, while you may be making payments, you’ll be mainly paying interest to start with and not the principal amount you borrowed.

 

How to get out from an upside down auto loan in Puslinch

 

First off, we think it’s important that you know you don’t have to get out from under the loan unless you’re selling the car or refinancing the loan. If you’re planning on paying it off normally, the situation will right itself over time without you having to do anything.

 

If you do want to take action, here’s what to do.

 

Increase your monthly payments

 

Increasing your monthly payments can help you escape negative equity faster. As long as you specify to the lender that the overpayment comes off the principal and not the interest, you’ll be paying down the loan faster so it will even out faster.

 

Use a larger down payment

 

While not very helpful when you’re in the loan, using a larger down payment can minimize the amount you go upside down with and perhaps avoid it altogether.

 

Larger down payments lower the overall amount of the loan. This lets you either buy a more expensive car or have a cheaper loan, whichever works best for your situation.

 

Wait it out

 

Waiting it out is our recommendation in the vast majority of situations. Unless you need to sell the car or refinance the loan, paying it off normally and not worrying about negative equity is what we advise.

 

The situation will right itself eventually and you won’t even notice after a while. If you can afford to overpay, that’s to your benefit but it isn’t necessary.

 

Make a lump sum payment

 

If you absolutely must escape negative equity on your auto loan, you can make a one-off lump sum payment to even things out. That’s assuming you have that kind of money lying around of course.

 

Work out how much you’re under by, raise the capital, contact your lender and work with them to make the payment. Like monthly overpayments, you need to specify that you’re paying off the principal and not the interest!

 

Sell the car

 

Selling the car is your option of last resort to escape negative equity in a Puslinch auto loan. We don’t recommend this unless you absolutely must get out of the loan or you risk defaulting and you have no other option.

 

If you drive a premium car, you may be able to sell it privately and pay off the majority of your auto loan and then pay off the rest over any remaining months. It will then leave you without a car while you’re still making payments, which is why we don’t recommend it.

 

Contact Unique Chrysler for help, advice and competitive Puslinch car finance and leasing.

 

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Categories: Auto Loan

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