Getting out of an Upside Down Car Loan in Mississauga
Getting out of an Upside Down Car Loan in Mississauga
Posted on September 1, 2021
Being in an upside down car loan isn’t a bad thing. In fact, you don’t actually need to do anything about it if you’re planning to keep the loan. If you’re planning on refinancing or changing it up, you will need to address the situation.
That’s what today’s post is all about.
We asked our Mississauga auto loans team to come up with some actionable ways to get out of an upside down car loan.
Upside down auto loans
Being upside down in an auto loan is another term for negative equity. It happens when the value of the car falls below the amount outstanding on the loan so the loan is for more than the car is worth.
This usually happens with new car purchases and longer car loans.
It isn’t a bad thing if you’re planning to keep the loan and you don’t actually need to do anything as it will even itself out over time. If you are planning on making changes though, you may need to address it.
Here’s how.
First, check you can make overpayments on your auto loan. The majority of loans allow it but not all of them do. Check beforehand to make sure.
Regular overpayments
Making regular auto loan overpayments is an affordable way to get out from an upside down car loan. It doesn’t have to be by much as every little helps.
For example, your loan payment is $285 per month. You could round up to $300, $350 or even more per month if you wanted to.
As long as you specify to the lender that the overpayment is to come off the loan principal and not interest, you’ll see the amount you’re upside down reduce over time.
You’ll also pay your loan off faster too.
Lump sum payment
You can also make lump sum overpayments instead of, or as well as, regular overpayments.
Contact your lender, tell them what you want to do and arrange to make the payment. It will usually involve a bank transfer of a set amount to your loan account but different lenders work in different ways.
Pay more frequently
Most auto loans involve a monthly payment on a date you set. Some are flexible enough to be paid at different times as long as the lender agrees.
Paying fortnightly is common in the U.S. as there are more fortnightly paid workers there. This method does have benefits through. Pay fortnightly and you get a slight reduction in interest due and you get to make an extra monthly payment per year, which also accelerates paying the loan.
Wait it out
Unless you absolutely have to get out of the loan, just keep paying it off and you’ll soon get out of negative equity. As you pay down the loan, the amount you owe will reduce below the value of the car and you’ll be the right way up again.
Being upside down is not a bad thing. In fact, it’s normal for new car purchases. It’s only if you need to change the loan or your situation that you need to do anything about it. Otherwise, you can forget about it and get on with your life!
Contact Unique Chrysler for help, advice and competitive Mississauga car finance and leasing.
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