If you are stuck with an upside down auto loan, it means you currently own more on your vehicle than it is worth. Although it is an unpleasant situation to be in, you should know it is fairly common nowadays and is often the result of depreciation in vehicle value, low down-payments, and extended-term loans.
You should also know that you may be able to refinance your upside down auto loan, which can help you save money or pay off your vehicle faster. The following tips will help you refinance an upside down auto loan.
Analyze Your Situation
It can be quite discouraging to owe more on your vehicle than you could expect to get by selling or trading it in. If you are in this predicament, you should take a minute to analyze your situation. Although the best method for resolving an upside down car loan is to pay it down as quickly as possible, this is often difficult to do. This is because the loan payment you are making is probably a decent chunk of your monthly income.
You need to determine if you will benefit more from reducing the amount of your monthly payments or shortening the length of your loan term. If you refinance and reduce the amount of your payments, your loan term will likely be extended further than it already is. Since you are already upside down, this may be a good option if you are looking to save money. The second and better choice is refinancing to shorten the loan term.
Although this will likely raise your monthly payments, your interest rate may go down and you will have your vehicle paid off much faster. It may also be possible for you to take out a home equity loan, provided you have equity in your home. A home equity loan usually carries a lower interest rate, and could give you the funds necessary to pay off your auto loan.
Once you analyze your situation and determine which option would be best for you, you can begin to shop around for lenders who are willing to refinance your upside down auto loan.
Your next step in refinancing an upside down auto loan is shopping around for lenders who are willing to extend their services to you. Look for lenders who specialize in auto refinancing, as they may be more likely to help you out. You can explore your options online, as most lenders now have websites that list their available services. When you locate lenders that offer auto refinancing, inquire with as many as possible. Because interest rates and loan terms vary from lender to lender, you should make sure you compare every quote you receive.
If you find a lender that is willing to give you a loan that benefits your situation, go with it. Whether you have chosen to extend your loan term and reduce your monthly payments or shorten your loan term and raise your monthly payments, the loan you decide on should help you out considerably.
If you are dealing with an upside down auto loan, these tips can help you refinance. Once you refinance and get your situation under control, you will be glad you took the time to explore your options and take charge of your problem.
This is a guest article by Cameron Gray. Guest post from Cameron Gray. Cameron writes for AutoInsuranceQuotes.org.