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What happens to my car loan if I trade in my car?

I want to trade in my car—a local dealership is offering full Kelley Blue Book value. But I still owe money on it. Can I trade in a car that is not paid off?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Getting full
Kelley Blue Book
value for your car is an awesome deal! If there was ever a time to trade your car in, this is it.
Regarding your current car loan, the way in which it will be handled is dependent upon whether you have negative equity or positive equity.
If you have negative equity on your
car loan
, that means your loan balance is more than the value of the car. In this case, you’d use the proceeds from trading the car in and apply it to your loan. Any remaining balance you can pay out of pocket or roll over into the new loan.
But maybe—just maybe—the Kelley Blue Book value will allow you to pay off your entire loan balance. Keep your fingers crossed!
If you have positive equity, your loan balance is less than the car’s current value. You can simply trade the car in and use the proceeds to pay off your old loan. Any extra cash goes right in your pocket!
Since you’re getting a new car, you should also shop around for car insurance. Your lender will require you to carry full coverage, which can get expensive. To find the best deal on car insurance, use the
Jerry
app to compare rates from over 50 name-brand car insurance companies in minutes. The average Jerry user saves $879 a year on car insurance.
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