Can I Roll Negative Equity into a New Car Loan?
Yes, it is possible. One of the ways to get out of a negative equity car loan is to essentially roll the equity into a new car loan. By trading your car in and having the dealership add the remaining balance of the loan to your new loan, you are basically transferring the equity to get out of the loan. Typically, a dealership will only work with you if the loan-to-value ratio for the car does not exceed 125%.
Keep in mind that you will get out of the original loan, but there are drawbacks to rolling over your debt. This is due to the fact that it greatly adds to the total amount that you owe. Putting yourself even further in debt is not always the best option, because you are essentially financing a larger amount. That means paying more interest over time!
Why Does My Car Have Negative Equity?
A car has negative equity if the borrower still owes more on the loan than the car is currently worth. Having a car with negative equity is not a situation that happens overnight. The most common reason why the car’s value went “upside down” is due to the fact that the car’s value depreciates faster than the loan balance decreases over time. That could be because you put down a small downpayment when financing your vehicle and the loan term was longer than average. The 20/4/10 car financing rule states that you should work to put at least 20% down when purchasing a vehicle if you can’t afford to pay for it upfront. Generally, it’s recommended to get a loan term shorter than 61 months to prevent things like negative equity.
How to Get Out of a Negative Equity Car Loan Without Trading in Your Car
If you want to learn how to get out of a negative equity car loan, the answer is that it isn’t as simple as you might think. Generally, if you don’t want to trade in your car to a dealership, you have two main options.
Pay the Car Loan as Fast as Possible By Making Additional Payments Just to the Principal
The first option is to just tackle the loan head-on. While that can be easier said than done, it is the most effective way to get out of a loan with negative equity without taking on additional debt.
You may want to consider getting a side hustle or a second job on the weekends to make ends meet and put additional money towards your loan each month. It’s a smart idea to make more than one payment towards the principal balance of the loan per month in order to deal with the debt as aggressively as possible. Just make sure that if you get a second job, don’t let it overwhelm you! If you’re burnt out, your mental health can take a nosedive. Try to find the balance between working a side hustle and time to relax. If you decide to drive for a ridesharing service, it may be easier to work at your own pace and only accept rides or orders when you have extra time.
Sell the Car Yourself
Another option is to just skip going to the dealership and sell the car yourself. If you can find someone willing to front you the money, you can use the loan proceeds to pay off some or all of the remaining balance. If the sale proceeds do not cover the total amount that you owe, you will be on the hook for that. But, if you are able to pay it off using your savings, then you can get rid of the loan with negative equity.
Can You Refinance a Car Loan With Negative Equity?
Yes, it is possible to refinance a car with negative equity. But, it will be more challenging to find a lender willing to work with you. Additionally, your loan can’t be in default at the time of your refinancing request. Lenders will typically only work with you if your loan is in good standing.
Refinancing your auto loan could mean accessing more affordable loan terms. However, remember that taking on the new debt means that you are still adding the amount you owe to the principal of the loan. You may be able to increase the length of the loan term to get more affordable payments, but you are ultimately paying more in interest over the life of the loan.
Refinancing your loan with negative equity may also mean receiving higher interest rates due to the risk associated with the loan.
Don’t refinance your loan unless the terms are better than what you currently have! Otherwise, it may be smarter to just work harder to pay off your existing loan and get out of debt.
How Can I Borrow Against the Equity in My Car?
When you have positive equity in your car, you can borrow against its value through a type of secured loan. This type of loan is called a title loan or a car equity loan. With a car equity loan, you can tap into your car’s value and use your loan proceeds to deal with various personal expenses! Things like overdue bills and rent payments can be challenging to deal with on your own. If you need emergency cash to make ends meet, a title loan can be the missing puzzle piece. Learn more about borrowing against your car’s value today by dialing 855-561-5626! Or fill out a short inquiry form online now to get started with Max Cash Title Loans. You can access perks like 24/ service and convenient loan terms!2 5