Last show’s topic was getting rid of your car loan faster. For some couples it’s a huge debt that eats up a big chunk of their monthly budget.
As stressful as it can be, there’s another situation that can make car loans even more taxing -when you owe more than what the car is worth.
Upside down car loans are worse because they are loans on a depreciating asset. Your will continue to lose value even as you make your payments.
Options With an Upside Down Car Loan
When you’re trying to get out of a car loan (upside down or not), you have to have all your numbers in front of you.
It comes done to either selling your car or refinancing it to better terms. We’ll go over some tips to help you just that in today’s show.
This is a long shot because you have to account for the difference between what you owe and what the car is worth. Here are a few ideas to help fill the gap.
- Sell some stuff
- Get a temp job
- Use your tax refund
- Get a line of credit
If you’re able to gather up that money, call up or visit your bank or credit union. Speak with someone at your local branch and see if you can work out a refinance.
Sell the car
If at all possible, my advice would be to sell the car. If your budget is already stretched, removing this debt as fast as possible can be a huge relief.
The problem of course that what you sell the car for will most likely be less than what you owe. So what do you do with the difference?
Before you put the car on the market, talk it over with your current loan provider and explain to them that you’d rather owe them a few grand then the five figure debt you’re in.
Selling the car means that you have to be able to transfer the title so either they can work with you and get an arrangement made or you may have to go to your local credit union or bank and take out a personal loan to cover the difference.
So what if you have things in place, just how do you sell your car for the most you can?
- Know Your Car and Buyer – Go ahead and picture who would be the most likely person to buy your car. When you put the word out you want to make sure highlight the features that matter most to them.
- Tailor Your Ad – Do you have a Honda Accord? Make sure to emphasize it’s reliability and how easy it is to maintain. Got a convertible you need to get rid of? Talk up how much fun it is and how fast it can go.
- Clean Your Car – You’d be surprised at how some people mess up their chances of getting buyers by not cleaning up their cars. When we were selling our old one, I had several people compliment the care I took. People associate clean cars with well maintained cars. Remember how clean it was at the dealership? That’s your goal – remove junk, vacuum, and detail it if necessary.
- Make your Pictures Pop – All the words in the world will only get so far. Entice potential buyers by taking great pictures of your car. While it doesn’t have to be a perfect sunny day, do make sure the sun is out and your car is looking shiny and new.
- Price Your Car Competitively – Yes, it would be absolutely perfect if you can sell the car for what you owe, but it’s likely not going to happen. Instead you’re better off putting it out there for a competitive price and having someone snag it sooner rather than later. Kelly Blue Book or Edmunds can help you get a quick assessment of what to offer.
- Advertise – Use websites like Craigslist, Autotrader, and Cars.com to get the word out. Let all of your friends know on Facebook or Twitter that you’re selling your car. They may someone who would love to buy it. Don’t forget to put a For Sale sign up on your car. It still works.
- Sell it – The last part is one you have to be most careful with. Make sure you follow the terms of your current loan provider and state DMV.
If you have any other suggestions for digging out from an upside down car loan, please send them in. Leave a comment below or tweet me @CMoneyPod.