Do I Need A Personal Loan To Cover Negative Equity In My Car
You might be one of the many car owners who have rolled down negative equity to finance your car. You might be wondering what to do and how to get rid of this loan. A personal loan from your bank is one option. This is how to determine if a personal loan from your bank is a good idea.
What is negative equity:
Negative equity refers to a situation where you owe more on your car loan than the car is worth. This can happen if you have a high-interest loan, if you financed a car with a long loan term, or if the value of the car has depreciated significantly.
What is a personal loan?
Personal loans are those that don't require collateral. You don't have to put up your house or car in order to get it. Lenders, like when you buy a car or home, will instead use your credit score. They will give you a loan at a specific interest rate depending on your credit score. Your rate will generally be lower the higher your score.
CrediReady states that personal loans can be obtained starting at $100 up to $50,000, although terms may vary from lender to lender. Some terms can range from 12 months up to decades, depending on the amount and the lender.
However, before taking out a personal loan to cover negative equity in your car, it is important to consider all of your options. Some other options to consider include refinancing your car loan, selling the car and paying off the loan with the proceeds, or trading in the car for a less expensive model.
What is the best strategy to get out of a negative equity situation?
If you are able to get money from a bank, then a personal loan can be a great option to avoid the upside loan situation for your car. You don't need collateral so you don't have to risk your assets. However, the extra money can be used to resolve your negative equity issues.
How to negotiate with the bank to get a personal loan
Showing the bank that you already have a partially-unsecured loan is key to getting a personal loan. You can repay your old loan with this loan.
Looking towards the Future: Avoiding repeats and negotiating a lower payoff
When you apply for a personal loan, your top priorities should be the payoff of your car loan and its settlement. You can show the lender that getting some money back is better than nothing. Also, emphasize the benefits of having more money now than later. Once you are out of this mess, create a budget. Don't exceed a monthly limit so that your credit can be rebuilt over time.
It can be frustrating to find yourself in a situation where your loan is in default and you have negative equity on your vehicle. You have other expenses to think about and that just adds to your bills. If you are smart and apply for a personal loan, you will be able to get the extra cash that you need. This will allow you to achieve financial success as well as the ability to manage your monthly payments.
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