Upside Down Loans

[babymandm]

I know it's not a place you want to be when you're upside down on an auto loan but from your experiences, what is the most you've seen a bank finance when you're upside down on a loan? I was told today by a dealer in another state they can usually get away with 2-3 even 4 grand. And I've been looking online everywhere for some kind of calculator that will let me see what the balance of my auto loan would be at a certain time if I put this amount of money extra on the loan each month. I'm not a math person and I even called my lender and they couldn't tell me. I want to get my loan down as much as I can so I'm not too upside down to trade it in the spring. Right now I'm about $7-8000.00 upside down.

[Bodywerks]

How are you that far upside down? Are you a high risk buyer resulting in a high interest rate? No money down purchase? did you do a long term finance, like 6+ years? That's a lot of years for a v6 Camaro. I can see buying a brand new car and having it lose significant value just driving it off the lot, but unless you over-paid, you shouldn't be out much, maybe a couple grand, seeing that you've only had the car a couple months and you bought it used.
Take it back to the dealer you bought it from and see if they will work with you.
One thing I wouldn't do is finance negative equity, that's for darn sure. If I had to take a loss i'd pay it in cash vs paying interest on it. That would be like getting a payday loan to pay a payday loan...

[2013 Orange SS]

You were upside-down when you started the engine and drove off the lot!

[DRKS1D3]

If you're that far upside down on your loan, the last thing I'd be thinking about would be a new vehicle. You're already buried up to your eyeballs in debt and now you're going to compound the problem. Why are you considering a trade? What are you considering trading for? The bank is correct. They're not going to let you roll $7-8k into another car. Imagine if some fool did this over and over again. Eventually, they'd be financing a $35k car, but would owe $70k on the loan from all the rollovers. Not a wise financial decision. I don't know your age, but it appears as if you're young and have made some poor, perhaps spontaneous auto purchases. You don't want to wake up when you're 40 and have a credit score of 117 because of foolishness. Good luck OP!

[motorhead]

That is a vicious cycle that you don't want to get into. It only gets you deeper and deeper once you pile debt onto debt. I would be asking myself first, why am I 8 grand upside down on this car. Was it because you already piled debt on that loan, or did you take the loan out for a very long term? (Long meaning more than four years) It sounds like maybe you should be either hanging on to the car you got or be putting an extra $1,000 a month on the existing loan just to get it even. You have to also remember that your car is depreciating as we speak. Which means it will be worth even less come May. I highly doubt you have an extra $1,000 a month of excess cash laying or there would be no reason for you to be that upside down. Cars are not worth ruining your finances and life over.

Edit: Also, DO NOT, I REPEAT DO NOT LISTEN TO A CAR DEALER WHEN TALKING FINANCES. Their job is to sell you a car at any cost. They don't care how it will affect you down the road. They are one of the reasons people get upside in the first place.

[Kens ss]

Your auto loan is most likely a simple interest loan. So making payments above your regular payment would go directly to reducing your balance.

If you want to pay down the $7000.00 that you are upside down on by spring , the math is simple. 7 months until spring x $1000.00 extra a month= $7000.00

If you pay only an extra $250.00 a month for the next 7 months, you will reduce your balance by approx $1750.

Of course during this time your regular payment, will be reducing your principle as well.

As far as calculator there are many apps and most banks and credit unions have calculators on thier web site. You simply enter the loan amount ,interest, and years of your loan, then you can look at the amortization of how much is applied the the principal each month. You will see a chart the will show the the amount applied to the principle increased each month.
During the early months or years of your loan, the amount applied to interst is highest.

Like others have said. You are in a bad financial position with this loan. You need to get over your car fever, and get this loan balance under control first, or you will regret it a few years from now.

[Bodywerks]

Originally Posted by DRKS1D3

If you're that far upside down on your loan, the last thing I'd be thinking about would be a new vehicle. You're already buried up to your eyeballs in debt and now you're going to compound the problem. Why are you considering a trade? What are you considering trading for? The bank is correct. They're not going to let you roll $7-8k into another car. Imagine if some fool did this over and over again. Eventually, they'd be financing a $35k car, but would owe $70k on the loan from all the rollovers. Not a wise financial decision. I don't know your age, but it appears as if you're young and have made some poor, perhaps spontaneous auto purchases. You don't want to wake up when you're 40 and have a credit score of 117 because of foolishness. Good luck OP!

In fairness to him, if you look up his profile and read some of his posts, his first Camaro was totaled out by insurance. Luckily they paid off his entire loan plus a few hundred. Then he was in desperate need of a car seeing that he no longer had his baby, and ended up with the car he has now only a few days after the fact.
I still don't see how he could be that far upside down on a used car that he's only had long enough to make maybe one payment on, unless he over-paid in the first place...

[Pluto]

I am a loan officer at a credit union and our guidelines do not allow us to finance anything over MSRP. I've financed maybe $500-$1000 over, but I have also seen auditors start handing out write ups for that. I just look at it from the repossession side. If that vehicle is upside down you are already out TTL, what it depreciated, and the left over "upside down" balance. I would just keep what you have and pay the balance down. Try to add whateve you can to your monthly payment.

[trashmanssd]

(not directed at the OP just general advice, I don't know enough about his situation to know how he got where he is) With 0 dollars down most car loans are upside down till at least the half way mark. You need to make sure you take a loan for the amount of time you plan to own the car (i know stuff happens but lets be real we all know the people who take 5 plus year loans and have never kept a car more than 3 years). If that means you cant afford the payment then you cant afford the car in the first place, stretching the payment out to 6-7 years so you can afford it means you better keep the car that long and be able to pay for repairs and the payment at the same time once the warranty is up.

[trashmanssd]

OP, most banks will only lend you the cars value. Even then they are taking a risk that if you default the car will most likely not return them the principal at auction. Usually if you are rolling negative equity into a car loan its offset by dealer discounts manufacturer rebates or incentives. For example if you look at a car that stickers for 30K but get 3k off from dealer plus manufacturer rebate of 1K you could roll 4K of negative debet into that loan, maybe even a little more as they can roll sales tax and dealer added items into your loan so maybe even 10% over the cars sticker or for used car blue book value. Just some advice now may be a time to get the car you need not the car you want, which may be a cheap new econo box on a 3 year loan so you can build some equity up. those cars are not sexy but they have cheap payments and are cheap on fuel and tax and insurance and tires and repairs.

[Warpaint69]

Originally Posted by motorhead

That is a vicious cycle that you don't want to get into. It only gets you deeper and deeper once you pile debt onto debt. I would be asking myself first, why am I 8 grand upside down on this car. Was it because you already piled debt on that loan, or did you take the loan out for a very long term? (Long meaning more than four years) It sounds like maybe you should be either hanging on to the car you got or be putting an extra $1,000 a month on the existing loan just to get it even. You have to also remember that your car is depreciating as we speak. Which means it will be worth even less come May. I highly doubt you have an extra $1,000 a month of excess cash laying or there would be no reason for you to be that upside down. Cars are not worth ruining your finances and life over.

Edit: Also, DO NOT, I REPEAT DO NOT LISTEN TO A CAR DEALER WHEN TALKING FINANCES. Their job is to sell you a car at any cost. They don't care how it will affect you down the road. They are one of the reasons people get upside in the first place.

I work with a guy thats had 5 different vehicles in the last 6 or 7 years. Not one of the 4 previous vehicles were paid for and he keeps rolling the unpaid balance of the loan into the next trade. The guy can literally not walk away from a dealership without buying something.

I told him if he's not going to pay off a loan, why not just start leasing a vehicle? You get something different every year or two anyway.

[TPAJETSKI]

Years ago I was upside down on a car loan. Don't recall how much, but I'd say a couple grand or so. I got out from under it by purchasing a brand new car that had heavy incentives. All the incentives took care of the negative equity plus brought the car down below MSRP. I learned my lesson after that. I don't think I've been upside down on a car since. As someon above stated, if you are sure you will keep the car for the life of the loan being in the negative the first couple years probably isn't fatal, unless the car gets stolen or totaled and you can't recover enough from insurance to pay off the note. But that never happens

[Destructo09]

To actually answer your question, banks will normally let you finance about 110-115% of retail KBB value.

Other than that, I agree with these guys, don't do it. You won't be able to get financing anyway with that much negative equity unless it was a really expensive new car. Or you got a screaming deal on the new car price.

[JLSuperfly]

OP, you got some good advice from members here. Good luck.