Are you upside down on your car loan? When you are upside down on a car loan, it means that you owe more on the loan then you can sell the car for. This happens when you trade in a car for a newer one and the dealership roles your old loan into your new one. It can make it very difficult to get ahead when you make this move. If something were to happen to your car, your insurance would not completely pay off your loan, and so you would need to continue to pay on your old car while purchasing a new one.
You may be considering selling your car early for a number of reasons. One reason is that you may have realized that your car payment is too much every month, and it is breaking your budget. So what do you do if you owe too much on a car loan? You can find other areas to cut in your budget, and stick it out or you can sell the car.
Dave Ramsey gives excellent advice on how to do this. He explains that you need to take out a personal loan from your bank or credit union to cover the difference between the amount you owe, and the amount that you can sell the car for. This will allow you to sell the car and pay the car loan off so that you can release the title to the new owner. He then recommends that you go and buy a car for a few thousand dollars, then pay it and the personal note off. Then you start saving for a nicer car.
If you feel overwhelmed by your car payments this may be the way to go. You can save a lot of money by paying cash for your car as well. Many people do not realize how much of their monthly budget is actually going towards car payments. If you did not have the extra payments you would have a lot more freedom in how you spend your money.
Related Articles:
Financial Pitfalls: The New Car Mentality