Driving a car that has a value less than what you owe on it can be very frustrating. It may feel like you will never get out of debt. The best option is to be on time with your vehicle loan. If your budget is getting tight and paying that car loan is getting difficult, it is time to sell the car before you have to worry about car repossession.
How do you get out of a car loan when you owe more than it’s valued?
The process begins verifying the value of your car. Do a search on either Edmunds.com or Kelly Blue Book. Be honest about the condition of your, it won’t help you when someone tries to reduce your sale price. Be sure to use the amount listed for a private seller when you list the car for sale.
Your next step is to contact your bank and verify the amount you owe on the loan. You will also need to let them know that you are looking to sell the vehicle. Verify the steps you will need to take in order to have the title released to the new owner. More than likely, they will send the title to a local branch where you can make the transaction with the new owner.
Once you have these two numbers, you need to determine a way to make up the difference between the two. Your choices are to save it up or to borrow it.
If you have decided that you need to borrow the money, contact the bank that holds your current car loan and talk to them about taking out a smaller loan. Explain to them that you are underwater with your car loan and are trying to get out from under that. Ask to take out a loan for the difference between the sale price of the car and what you still owe on the vehicle. Now, you have a smaller loan that is much easier to pay off.
If you need to purchase a replacement car, take out $1,000 or $1,500 over the loan amount and drive around a lower value car while you are paying off the smaller, new loan. Once the smaller loan is paid off, you can begin to save money for a newer vehicle.
Driving a car that you own outright is a great feeling! Following these steps will help you get there quicker!