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Another upside down question.

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Quickdraw
Established Member

Another upside down question.

Ok I have a 2005 Chevy Equinox in which the pay off is around $11,000 with an interest rate of 17.9 %, and payments of $351.00 a month. The trade in value is around $7000. I know I will be upside down but what should I do to get into a newer car with a much lower interest rate. I have a bank that will finance me a new car at the going rate but what can I do with the negative equity. I do not have any money to go with it what should I do suck up the 17.9% and keep paying or shop around.

Message 1 of 4
3 REPLIES 3
Eager2Learn
New Contributor

Re: Another upside down question.

Negative equity will have to be paid to do anything with the current vehicle.  Depending on the fine print of your current loan, you can pay more each month to try and get the principle paid down faster.

As a last resort, if you can get a good enough "deal" on a new car (rebates, haggling, some cash down, etc) you may be able to get rid of your current vehicle.  I would highly advise against doing this, it is the snowball effect with rolling negative equity.  

Message 2 of 4
Anonymous
Not applicable

Re: Another upside down question.

Quickdraw,

Have you considered refinancing the loan? It looks like you've been paying on it for a few years now, which may have boosted your credit score. If you've never been late and never missed a payment, you should consider refinancing it with your local credit union or another lender. I think the minimum amount to be refinanced is about 7k, so you're fine with the 11k you owe.

 

It's not a good idea to roll the negative equity into a new loan. Most lenders won't even allow you to do it anymore. If the bank you mention will finance you for a new car at a good interest rate, there's a good chance they'll approve you for a refinance as well, depending on your payment history and credit score of course. Refinancing and getting a much lower interest rate will drop your payments and allow you to get out from being upside down on the loan. Good luck!

Message 3 of 4
Eager2Learn
New Contributor

Re: Another upside down question.

Buckeye, 

Refinancing is only a possibility if the OP can fund the difference between the amount owed and the assessed value as collateral. Especially in today's world of credit, a bank will not loan $11K with a $7K auto for collateral.

 

The difference with a new vehicle (again, I think everyone is against rolling negative equity) is that banks generally use the MSRP as their assessment.  If you got a $5K rebate and covered some of the taxes, title fees, tags et cetera a bank could approve that loan because the total loan would still be at MSRP.

Message 4 of 4
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