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What happens when a car is totaled and it still has a loan?

My claims adjuster notified me that my car is totaled—now what? I still have a loan left on my car.

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Shannon Martin · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Your
car insurance
company will handle everything for you if your car is totaled with an outstanding loan. They will send the claim payout directly to your bank and you will be issued a check for the difference between the payout and the ACV (actual cash value) of your car.
If the ACV of the car is lower than the balance of the loan, you are responsible for paying the difference to the bank. This may seem scary—but you have a few options to avoid a hefty payment.
Gap insurance
can pay off the difference between the insurance pay-off and bank loan. Check your dealership and insurance paperwork to see if your policy includes gap insurance. If so, file a claim.
If you don’t have gap insurance and need to get a new car right away, you may be able to roll the remaining balance of your car loan into a new one.
The car dealership may be able to facilitate this for you. However, it will make your car payments higher than normal, so you will want to look for ways to save money elsewhere.
If you want to save money on car insurance, the
Jerry
app is a good place to start. A licensed broker, Jerry does all the hard work of finding the cheapest quotes from the top name-brand insurance companies for you. Sign-up and comparing quotes is completely free.
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