Things change when you are in debt. There are numerous reasons why you need todig out of your auto loan. You may be looking for a new vehicle. That is because you have a growing family and like to buy a car that provides more mileage, which is more fuel-efficient. You may not be able to pay your existing car loan because of a sudden financial emergency such as loss of employment, medical costs, or home renovation expenses.
Do you know what negative equity auto loan is? Well, let us explain. It means the amount you need to pay for the vehicle is more than the actual price of the car. It is called negative equity car loan. Even if you decide to sell the car, the proceeds will not be adequate to repay your existing debt.
There are several reasons for a negative equity auto loan. Let us explain this point with the help of an example. For instance, if you purchased a vehicle with no down payment or less initial payment, it means that you will need to shell out the entire loan amount in the days to come. To cut a long story short, your total loan cost increases. You will also enter into negative car loan equity if you pay more for the car or buy some add-ons that do not increase the vehicle value.
According to an article published on https://www.huffpost.com, there are many ways to pay off your loan quickly, one of which is refinancing your existing auto loan. Therefore, read on this article to learn about some of the smart tips to dig out of your car loan.
Find the market price of the car
Vehicles depreciate fast. Unlike your home that increases in value with time, cars go through wear and tear over the years as they age with time. Moreover, a car is also difficult to maintain, especially when it comes to the cost. Did you know that new cars depreciate by thousands of dollars the moment you drive the vehicle away from the dealership’s lot? Therefore, it is imperative to figure out the current market price of your car. That is because it will help you as to how to proceed when it comes to digging out of your existing car loan.
We recommend that you research on Google and look for a car value calculator. Enter details like your vehicle’s model, make, manufacturing date, and the number of kilometers the vehicle has run on the road. Using these details, check the online classifieds and assess what used vehicle models with the same features cost now. Once you get an approximate value, you can decide whether it makes sense to sell your car and repay the loan or opt for a consolidated auto loan.
Refinance or consolidate your existing auto loan
If you find that, you selling your car will not fetch you enough money to repay your auto loan, you can consult with loan experts associated with NationaldebtRelief.com to refinance or consolidate your existing debt. It is the best bet for the borrower as well as the lender because the lender can avoid paying to repossess your vehicle in case you fail to make the monthly payment on your current auto loan. This way, you can manage to attain a better rate of interest on your car debt without spoiling your credit score.
As far as refinancing is concerned, it implies applying for a new loan to repay your existing debts. It also means changing your current loan terms to your benefit.
Based on your financial condition and priorities, you can apply for a consolidated loan with reduced monthly payments, low-interest rate, flexible loan terms, and paying in a lump sum. If you have an average credit score when you bought the car but the rating has improved over time, you can request for a competitive rate of interest.
Remember that refinancing does not make sense if your existing auto loan has a prepayment penalty. It implies that you will need to shell out a fee for paying your loan sooner than expected.
Transfer the auto loan
You can also choose to transfer your car loan to an individual who is willing you buy it. It is a situation when you decide to sell your vehicle. If you look for a person who may be willing to take on your loan, usually a family member or a friend, you may work on a new agreement with your family member’s name with the lender. The new borrower will need to follow a few rules and guidelines set by the lending agency. These include a good credit score, regular payment habits, and apt insurance coverage.
When it comes to credit unions and banks, they have stringent rules and may not approve a loan transfer. Then, you should research and look for lenders that accept the same. If you manage to transfer your existing auto loan, ensure the new owner, i.e., your friend or family member signs all papers. Else, you may land up in a financial soup if they fail to make the payment. Avoid negative equity on your car loan to avail auto loan transfer.
Giving your car to the lender willingly
It should be your last resort if you are unable to repay your existing car loan at any cost. That is because it will affect your credit score badly. You can work out this option only when you are not eligible for a consolidated loan or cannot repay your existing loan by selling the car.
If you decide to give the car to the lender, it will sell the vehicle in an auction. If the lender cannot collect enough money to cover the total loan amount, you will need to pay off the remaining balance. Voluntarily giving your car to a lender will not let collection agencies to repossess the vehicle. We recommend that you avoid this option because it will not only affect your credit rating but you will also have a problem getting a loan in the days to come. Opt for a consolidated auto loan to become debt-free fast.
Conclusion
Now that you have these smart tips handy, make an informed decision when digging out of your current auto loan. It will help you become debt-free quickly