When shopping for your next car, there are ways to minimize the chance you will find yourself upside down on your auto loan. If it is paid off or you have equity in it, getting rid of a car that you were once upside down on can really help you out. You can’t be upside down on a paid off car. Shopping for a … If you have bad credit and need a loan, shop for a personal loan with online lenders or try to get a home equity loan. If you’re upside-down on your auto loan—that is, you owe more than the car is worth—you’ll need to come up with extra cash to pay off your loan. How to Steer Clear of Ever Being Upside Down on a Car Loan. You might choose to postpone the sale until you can afford to pay down the loan and achieve a positive equity position or you might choose to proceed if you can come up with the money through other means. A lease means no loan, which means you can’t be upside down. Conversely, if the car is in good condition and you have the time to sell it, you could be looking at a bigger payout.

Upside-down loans can result from paying too much for a new vehicle, paying little or no down payment, having a very long loan term (72 months or more), having a high interest rate (possibly as result of bad credit), buying a high-depreciation car make/model, or rolling over a balance from a previous car loan that was also upside down. That’s a recipe for being upside down even faster. If you’re already upside down on one car loan and you try to get a new loan, dealers will often roll the shortfall from the old car to the new car without even telling you. If you know you’ll only keep a car for two or three years, consider leasing instead of buying. You can use that cash to pay off the loan on the car you're trading in. It can go toward your down payment. If you’re running out of cash and you want to get rid of your car, you might be looking at a quicker and easier option to get rid of it. When you add too many frivolous options to your car, you increase your final total, but not the value of the car. Step 4: Make Payments on Your Upside-Down Car Loan Until You Break Even Having an upside-down car loan means the amount you owe on your loan is higher than the car's value.

Don't Let Upside Down Get You Down. If the car that's giving you buyer's remorse won't net you enough money to pay off the loan when you sell it, then you'll want to keep making payments on the loan until you reach the break-even point. So, if your car’s worth $10,000 but your loan balance is $12,000, then you’re $2,000 upside-down.

Doing this will provide you with many benefits, including improving your chances of getting approved.

Sometimes you can't avoid the life changes that affect your vehicle needs. And if you have cash to provide as well, you can reduce the amount of your loan. A down payment of at least 20% makes it more likely that your loan balance will not exceed the depreciated market value of your car.

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