Being upside down on a car loan means you owe more than the car is worth. You can fix this situation by following the steps below.
What to Avoid
- Trading in the car. Trading in the car rolls your debt into a new loan. This means you will owe even more.
- Refinancing. Refinancing may lower your monthly payment. However, it keeps you in debt longer.
- Voluntary surrender. With voluntary surrender, you give up the car. However, the loan balance does not go away.
What to Do
- Pay it off early. Put every extra dollar toward the loan balance. This shrinks the balance faster.
- Sell the car yourself. You will usually get more selling privately than trading in. If a balance remains after the sale, cover it with savings. A small credit union loan is another option. Paying off a small loan quickly is better than carrying a large one.
Stay Focused
Avoid the traps listed above. Finish paying off the loan. Sell the car if needed. Commit to never financing a car again.
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