
Having bad credit can make it tough to get approved for a car loan, but it's not impossible. According to the article, 1 in 5 car buyers have bad credit, and many lenders offer specialized bad credit car loans.
To qualify for a bad credit car loan, you'll typically need to meet certain requirements, such as making a significant down payment or having a steady income. The article notes that lenders often look for borrowers with a credit score of 600 or higher.
Bad credit car loans usually come with higher interest rates and fees compared to traditional car loans. For example, the article states that borrowers with bad credit may pay an additional 2-5% in interest over the life of the loan.
If you're struggling to make payments, you may be able to negotiate with your lender to temporarily suspend payments or reduce the monthly amount.
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Understanding Bad Credit Negative Equity Car Loans
If you owe more on your car loan than your car is worth, you're considered upside-down or underwater. This can happen when the market value of your vehicle is less than the amount you owe.
Being upside-down isn't automatically a problem if you can keep up with payments and keep your car until the loan is paid off. However, life is unpredictable, and things can change quickly.
Your car is totaled after an accident, and you'll owe the lender the amount you owe, plus your negative equity. This can be a significant financial burden, possibly several thousand dollars out of pocket.
If you're struggling to make ends meet and want to downsize to a cheaper car, you'll have to give up your current car and also pay the negative equity. This can be a tough order if you're already short on cash.
The older a car gets, the less it's worth. Accidents, repairs, or other damage can further reduce its value, making it possible to owe more on your car loan than the car is worth. This is known as negative equity.
To determine the best option for dealing with an upside-down car loan, consider the following steps:
- Calculate your negative equity
- Reach out to your lender
- Take on a new loan
- Consider getting rid of your car
Assessing Your Situation
To assess your situation, start by checking your loan balance to know how much you still owe. This can be done by contacting your lender or reviewing a recent loan statement.
You'll also want to estimate the value of your car, which can be found on pricing guides like Edmunds.com, Kelley Blue Book, or the National Automobile Dealers Association (NADA). This will give you a conservative estimate, as trade-in prices are typically lower than private party prices.
To determine if you have equity, do the math by subtracting the loan balance from the estimated value of your car. If the result is positive, you have equity; if it's negative, you're upside-down, meaning you owe more on your car loan than your car is worth.
Where You Stand
To assess your situation, you need to know where you stand with your loan. Check your loan balance by contacting your lender or looking at a recent loan statement. This will give you a clear picture of how much you still owe.
You also need to estimate your car's value. Look up the trade-in value of your car on pricing guides like Edmunds.com, Kelley Blue Book, or the National Automobile Dealers Association (NADA).
Subtract the loan balance from the value of the car to find out if you have equity. If the result is positive, you have equity. If it's negative, you're upside-down.
Here are the steps to determine your situation:
This will give you a clear understanding of your situation and help you decide on the best course of action.
What Not to Do with an Upside-Down Plant
Don't overwater an upside-down plant, as this can lead to root rot and kill the plant.
Roots grow downwards, so an upside-down plant may not be able to absorb water properly, making overwatering a risk.
Don't expect an upside-down plant to grow as well as one grown upright, as the plant's natural growth habits are disrupted.

In ideal conditions, an upside-down plant can still thrive, but it will require more attention and care.
Don't hang an upside-down plant in a spot with direct sunlight, as this can cause the leaves to become scorched.
The leaves of an upside-down plant will be more prone to burning due to the plant's unusual orientation.
Don't prune an upside-down plant too much, as this can cause stress to the plant and make it more susceptible to disease.
Pruning is still necessary for an upside-down plant, but it should be done carefully to avoid causing unnecessary stress.
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Is Your Car Worth Less Than You Owe?
Being upside-down on your car loan can be frustrating and scary. You're losing money on the car as it depreciates, and you risk missing payments and having your car repossessed.
Check your loan balance by contacting your lender or checking a recent loan statement. This will give you a clear picture of how much you still owe.
Estimate your car's value using pricing guides like Edmunds.com, Kelley Blue Book, or the National Automobile Dealers Association (NADA). These guides will give you a conservative estimate of your car's trade-in value.
Do the math by subtracting the loan balance from the value of the car. If the result is positive, you have equity. If it's negative, you're upside-down.
For example, if you still owe $30,000 on your car, but its trade-in value is only $20,000, you're $10,000 upside-down.
Here are the steps to determine if you're upside-down:
- Calculate your negative equity by subtracting the car's value from the loan balance.
- Reach out to your lender to discuss your options.
- Consider taking on a new loan, but be aware that this may not be the best option.
- Think about getting rid of your car, but make sure you're not stuck with a large debt.
Options for Dealing with Negative Equity
Dealing with negative equity can be overwhelming, but there are options to consider. You can sell the car and get a personal loan for the difference, or save up the difference and then sell the car. This can help you get out of a bigger mess and keep the car from dragging you further underwater.
If you're not in a hurry, you can wait to buy another car until you have positive equity in the one you're still paying for. This means making additional principal-only payments to pay down your loan faster. You can also sell your car yourself, which might get you more money than what a dealer says it's worth.
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Negotiating with a dealer is also an option, but be careful not to roll the negative equity into a new loan. This can put you at risk of even further negative equity down the road. Instead, try to negotiate a shorter loan term to pay off the negative equity balance as quickly as possible.
Here are some key options to consider:
- Sell the car and get a personal loan for the difference
- Save up the difference and then sell the car
- Wait to buy another car until you have positive equity in the one you're still paying for
- Sell your car yourself
- Negotiate with a dealer, but be careful not to roll the negative equity into a new loan
Risks of
Dealing with negative equity on your car loan can be a stressful and costly situation. You may be stuck with a car that's worth less than what you owe on it, making it hard to sell or trade-in.
Having negative equity can lead to a situation where most of your monthly payment goes towards interest rather than paying down the principal balance. This prolongs the loan and prevents you from building equity.
Trading in a car with negative equity often means rolling that remaining balance into a new auto loan. This can stack on even more negative equity, making the situation worse.
You may be stuck paying off a car that's no longer reliable or usable, with high mileage, needed repairs, or even stopped running. However, you can't sell it without taking a big loss.
Here are some risks of negative equity in a nutshell:
- Hard to sell or trade-in your car without taking a big loss
- Monthly payments mostly go towards interest rather than principal
- Can lead to even more negative equity if trading in and rolling over
- Potentially being stuck paying on an unreliable or unusable car
Sticking with a longer-term auto loan may expose you to long-term risk, making you pay off a large portion of your loan after your car's value has significantly depreciated.
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Dealing with
Dealing with negative equity can be a challenge, but there are several options to consider. If you're upside-down on your car loan, you can try to sell the car yourself through a private sale, which can help you get a better price than a dealer trade-in.
You can list the car online or put a "For Sale" sign in the window to attract potential buyers. However, be aware that even if you sell the car for top dollar, you may still be left with a significant amount of negative equity.
One way to avoid this is to wait until you have positive equity in the car before buying another one. This can be achieved by paying down the loan faster through additional principal-only payments.
If you're unable to sell the car or wait for positive equity, you can consider taking out an unsecured personal loan to cover the difference. This can help you get out of the upside-down loan situation, but be aware that it will add to your debt.
Here are some key pros and cons to consider when dealing with negative equity:
It's essential to carefully consider your options and weigh the pros and cons before making a decision. Remember, dealing with negative equity requires patience and discipline, but it's possible to get out of the situation and start fresh.
Improving Your Position
Paying off debt is key to getting out of an underwater car loan. You're not truly free until you deal with all the debt related to it.
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Making extra payments towards the principal balance can make a significant difference over time. Even an extra $50-100 per month can pay down the loan faster.
Refinancing to a shorter loan term can also help you pay off the loan faster. If you originally took out a longer 6 or 7 year loan, try to refinance to a 3-4 year loan term once you have some equity.
Keeping up on routine maintenance and repairs can help preserve the car's value. Addressing issues early can prevent major repairs and increase trade-in or resale value.
Waiting for used car values to rebound can also improve your equity position. If your car has sharply declined in value but is still reliable, consider waiting it out to trade-in or sell when used car values increase again.
Here are some strategies to improve your equity position:
- Pay Extra Towards Principal
- Refinance a Longer-Term Loan
- Keep up on Routine Maintenance and Repairs
- Wait for Used Car Values to Rebound
Frequently Asked Questions
Will a dealership buy my car if I have negative equity?
Yes, some dealerships will buy your car with negative equity, but they may offer to pay off the loan instead. This can help you get out of a financially stressful situation, but it's essential to understand the terms and potential consequences.
How much is too much negative equity on a car?
Too much negative equity on a car is generally considered to be over 125% of its actual worth. Exceeding this threshold can make it difficult to secure a new car loan
Sources
- https://www.nerdwallet.com/article/loans/auto-loans/car-loans-upside-down
- https://www.ramseysolutions.com/debt/how-to-sell-an-upside-down-car
- https://www.cardealcanada.ca/car-loan-negative-equity/
- https://www.creditkarma.com/auto/i/upside-down-car-loan
- https://consumer.ftc.gov/articles/auto-trade-ins-and-negative-equity-when-you-owe-more-your-car-worth
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