Car buyers can avoid the tension of an upside down car loan by getting low rates on EZautofinance.net. Fill the online auto loan application form to secure lowest rates and make your monthly payments easy. This way the trouble of upside down will never trouble you. Car financing was never this simple!
Getting upside down on a car loan means your loan exceeds the current value of your vehicle. In other words, you owe more than you could get by selling your car or by using it in a trade-in deal. As you can't pay off the loan due to the negative equity, you're stuck with the car and the loan payments.
Following are the reasons which can cause an upside down auto loan:
Low Down Payment or No Money Down
A lot of borrowers intend on saving their cash and avoid down payment but it ultimately increases the interest amount.
A car loan term of five years or more can also increase your chances of being upside down. Remember that even if your payment seems affordable now, you are paying a lot more in interest because of longer term.
Rolling Old Car Payment into New Car Loan
Some people with an intention to get rid of this situation transfer their old car's remaining balance into a new auto loan. Thus, add extra debt on their new auto loan which increases the chances of upside down all over again.
Higher Interest Rate
While accepting vehicle loan, it may happen that you are forced to take a higher interest rate either due to bad credit or any other reason. This may direct your payment to interest more than principle.
Paying High for a Car
This happens when you buy an automobile without checking the Blue Book value, and end up paying more on your car.
How to get out of this situation?
Pre-payment could be an excellent way to pay off the loan faster. However, you need to be sure that your current loan does not include any pre-payment penalty because it could restrict you from paying additional cash. Thus, you can make extra payments each month and stay away from being upside down.
How to Avoid the Situation In Future?
# Make down payment (at least 20%).
# Keep the car loan term shorter than 5 years.
# Keep your car loan payment limited to 20% of your income.