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Is there a way to fix being upside down on a loan?
How can I fix my car loan? I just learned that I am upside down on my loan by $8,000! I don't know how this happened.
Shannon Martin · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Being
upside down on a car loan
can happen to anyone and the odds are you didn’t do anything wrong. For example, this usually occurs when your car depreciates faster than you can pay off the loan. What are your plans for your car? Do you plan to drive it until it no longer can be fixed or do you need the car to retain value for a trade-in?
If you don’t have plans to get a new car anytime soon, the best course of action is to keep making your regular payments and maintain your vehicle in the best condition possible. Then, once you pay off the car, save up as much money as you can to use as a large down payment on your next vehicle.
It is a little more complicated if you plan to trade in your car for a newer one. The simplest solution is to pay off your vehicle as soon as possible! As long as you don’t have a prepayment penalty fee built into your loan, this will help save money on interest. You can do this by:
- Paying it off in one lump sum
- Rounding up your payment so that a little more is paid towards the principal each month
- Have an additional monthly payment applied to the balance
Another option is to talk to your lender and
apply to refinance
your loan with a lower interest rate. This is a great option if your credit has improved since you initially started the loan and you haven’t missed any payments. Lastly, if you really want that new car, you may be able to trade your car in now, and the balance left over from your current loan will be rolled into your next one. Keep in mind this will automatically have you underwater on the new loan.
One way to save money while making this decision is by paying less for
car insurance
. If you are looking for a cheaper rate, Jerry
can help! Jerry is an app that shops prices with over 50 different insurance companies and delivers the lowest rates straight to your phone in seconds! View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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