If you are searching or want to apply for a loan to purchase or make payments on a vehicle, the last thing you want is to be upside down on your debt. Being upside down, or “underwater,” simply means that you owe more money to your lender than your car is actually worth. Sometimes if the window to pay back your loan is extended and your car has rapidly depreciated in value, you can find yourself in this situation. In order to avoid being upside down on an outstanding debt to a lender, it is important that you consider a few things and weigh your options even before you apply for the loan.
Here are 5 tips for avoiding an upside down auto loan:
Consider Depreciation Before You Buy
One of the best ways to avoid negative equity or being upside down on an auto loan is to purchase a car model that won’t depreciate to a certain point where it becomes more expensive than it is really worth. Many luxury cars will put you upside down on your auto loan almost immediately after purchasing it. You want to find a dependable car that will last and that you can sell in the worst-case scenario that you can’t pay back your loan.
Take Care of Your Vehicle
You also want to make sure that you keep up with regular and long term car maintenance. This can be everything from getting a regular oil change every 3000 miles to changing the brake pads in your car every 45,000 miles. The easiest way to go underwater on a loan is to allow the car to depreciate on its own by not taking the regular or common steps to keep the car in working order.
Can You Afford The Vehicle?
Whether you are looking for an eTitleLoan in Florida or in California, it is important that you consider your finances. If you can’t afford to pay back a loan you can put yourself into some serious fiscal hot water. And if you don’t want to be upside down in that water it is important that you are responsible before you agree to a lender’s obligation, and definitely before you sign on the dotted line.
Review the Terms of the Loan
It is also recommended that if you don’t want to put yourself in the situation of being upside down on a loan that you make sure you make your monthly payments on time or readjust the agreement to make your monthly payments a little bigger. If you know you are close to being underwater on a loan it might be a smart idea to arrange a new set of terms with your lender.
Pay Cash for Your Vehicle
Lastly, one of the best ways not to go upside down or underwater on a loan is to not apply for a loan in the first place. If you know for certain that you won’t be able to pay back a loan, it might be the wise and responsible thing to avoid an auto loan in the first place. You can raise the money yourself, or ask friends and family, and purchase the vehicle outright so that you don’t have to worry about it every again.