How do you fix an upside-down car loan?

I think I’m upside-down on my car loan. I’m worried about totaling my car and having to pay off my loan. How can I fix it?

The first step in fixing an upside-down car loan is to calculate your negative equity. To do this, find your car’s value using a website like the Kelley Blue Book. If the value of your car is less than what you owe on your loan, you have negative equity. The difference between what you owe and your car’s value is the total amount of negative equity you have.
Once you know how much negative equity you’re working with, you can do one of a few things:
  • Pay off the loan. Not everyone will be able to do this, but it is the best and fastest way to dig yourself out of an upside-down car loan.
  • Contact your lender. Find out if your lender allows extra payments toward your principal every month. You can also ask to adjust the terms of your loan.
  • Refinance your car. If you’re not able to adjust the terms of your current loan, it might be a good idea to refinance. Refinancing your car could get you a better interest rate, or you could opt for a shorter repayment period to pay off your loan more quickly.
  • Sell your car. Selling your car may allow you to use the profits to pay off your loan. Then, you can purchase a cheaper vehicle.
Another option is gap insurance. While it won’t help you fix your car loan, it will pay the difference between what you owe and your car’s actual cash value if it’s totaled.
If you’re looking to refinance your vehicle, Jerry can help. Jerry compares offers from multiple lenders to make sure you never overpay for your loan.
Liz Jenson
Answered on Dec 03, 2021

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